Should You Buy a New Home Now?

There are plenty of benefits to owning a home — financial stability, not having to answer to a landlord, and the pride that comes with attaining such a huge goal. But is now a good time to buy a home, or are you better off waiting? Here’s what you need to know.

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Inventory is down

In May, there were around 31% fewer homes on the real estate market compared to where things sat a year prior. Not only might limited inventory make it more difficult for you to find a home that appeals to you, but it also means you’re apt to face stiff competition.

In fact, many homes on today’s market are winding up in bidding wars, where two or more buyers battle it out over the same property. Bidding wars can be extremely stressful, but these days, they’re quite common.

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Another thing to keep in mind is that if you’re a first-time buyer looking for a starter home, you might struggle even more. Though housing inventory is down on a whole, there’s a particular shortage of entry-level properties on the lower end of the market, making it a tough time to bust in as a first-time home buyer.

Home prices are up

Any time a commodity is limited, its price can climb when demand exceeds supply. That’s exactly what’s happening in the real estate market today.

Home prices have skyrocketed on a national level. In April, home prices were up 15.7% compared to where they sat the previous year. That means if you’re going to buy today, you’ll need more money on hand for a down payment and you’ll be looking at taking out a larger mortgage to finance the home you buy.

Mortgage rates are competitive

One positive thing about buying a home today is that mortgage rates are very competitive. As of this writing, the average interest rate for a 30-year fixed loan is 3.101%, and the average rate for a 15-year fixed loan is 2.403%.

Granted, these levels are a bit higher than they were last summer, when mortgage rates really hit an all-time low. But historically speaking, they’re still very attractive. If you have a strong credit score — meaning a score in the mid-700s or higher — then you’ll be more likely to snag a low mortgage rate that can, to some degree, help offset the cost of a more expensive home.

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Buy now or wait?

Many people are eager to get in on today’s housing market, given that mortgage rates are so competitive. But limited inventory and inflated housing prices may pose a challenge you’ll struggle to overcome.

There’s certainly nothing wrong with looking for a home to buy in today’s market and seeing where that takes you. But if you have a hard time finding a property that meets your needs and budget, then it could pay to wait on buying until inventory opens up and home prices come down.

The good news is that mortgage rates are likely to stay low well into next year and quite possibly beyond. So if you don’t manage to buy in the near term, you won’t necessarily miss the opportunity to lock in an affordable home loan.

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