Why You Shouldn’t Let Rising Inflation Delay Your Plans to Buy a Home

Rising inflation, home prices and mortgage rates could be making you think twice about buying a home. But there are many factors to consider and we want to you to know a few key things before you make your decision in this economy.

The Cost of Waiting Could Be More than the Cost of Buying

When people are asking if now is a good time to buy, there are two key things to consider: appreciation and equity. As inventory remains low and home prices continue to rise, that means your home is growing in value and you are building equity. As of April 2022, the average home in the U.S. had grown $55,000 in value in the past 12 months. That means $55,000 of equity gained for homeowners. And that number is projected to continue to rise each year for at least the next 5 years. Market experts are saying that potential growth in household wealth over the next 5 years based solely on increased home equity is $96,343 if you purchased a $360,000 home in January of 2022. If you wait to buy, you will miss out on that equity. And if you continue to rent, you will be paying someone else’s mortgage and contributing to their equity building instead of your own. So if you can afford to buy now, then it’s a good time to jump on the opportunity.

Mortgage Rates

When it comes to increasing mortgage rates, they are expected to continue to increase. However, they are still at historic lows if you compare them to years in the past. The 30 Year Fixed Mortgage rate in October of 1981 was 18.53%. For many years, the average was around 8%. As of June 2, 2022 it’s 5.09%. If you’re thinking of buying a home, the most important thing to do is get pre-approved for a mortgage. This will help you understand how much buying power you have and then you can start looking for homes within your budget. We can set you up with a great lender who can explain all of your mortgage rate options. Sometimes it helps to gain perspective on the current market by comparing it to years past. See below for the average mortgage rates from 1971 to 2022.

Source: Freddie Mac

Buying a Home Will Help Stabilize Your Monthly Costs

A fixed-rate mortgage will help you regulate and maintain your monthly expenses because the biggest portion of your housing expenses will be the same every month. While property taxes and utilities can fluctuate, the mortgage payment will be the same. When you own a home, you also won’t have to deal with rising rent costs and getting priced out of your home. During inflationary times, you want to be able to put your money somewhere where it can grow in value, not lose value. Experts say that housing is historically a good hedge against inflation.

Key Takeaways

Ultimately, there will never be a perfect time to buy a home. The market is still competitive for buyers, but we are starting to see a slow shift towards more home inventory. At the end of the day, it’s about what you’re comfortable with. Do your research and if the numbers work out for you and you can secure a mortgage with a monthly payment you can afford, then it’s a great time to move forward with buying a house. If you feel extremely stressed out and want to wait until the market conditions shift more, that’s okay too. We are always available for a no pressure conversation about the current market, your real estate goals and the options you have to buy and sell in Philadelphia. Whatever you decide, it’s best to start to get your finances in order so you can work towards buying a home when you’re ready. Build up your savings for a down payment, get your credit score to a good place and keep an eye on the market conditions. Do you have questions about the current market? Send us a message today!