Market values are currently high compared to their lowest levels only six short years ago, and with interest rates on the rise, this is a recipe for high mortgage payments.
If you consider the payment criteria as mentioned above (high values/rates) and you intend to sell in less then twenty-four months, buying in this market will not make as much sense. Although if your intention is not to sell and you expect to live in a home (purchased now) for a short time and buy again, you could make said house a rental property.
If you are planning to live in a home for three to seven years or more considering the following may persuade you not to look at the current market as a concern. If you can afford what you want now, then over the next one to two years, you will likely see improvements to the market interest rates in your favor.
For example, mortgage rates have been trending higher for nearly two years; it would be safe to say if the market follows historical trends (positive or negative) then we could expect to see rates improve again. If you purchase right now, it is highly probable you will see interest rates improve within the next one to two years.
From 2008 to 2013 mortgage rates went from 5 to 6 percent market average on a 30 year fix down to 3 to 4 percent market average.
The strategy for purchasing in the current market should be to put a favorable amount down and or pay down your mortgage balance over a defined “additional payment schedule.” As stated above, within two years you will likely be in a position to lower your interest rate around 1% or more. Benefits will also include long-term savings and a significantly lower payment or improved term.
Will you lose your investment? The short answer is, this is up to you. By purchasing now and being intentional about improving your interest rate and term your next most important move is when you choose to sell.
In summary, if you are finding homes that meet your needs the reasons to purchase a primary home in our current market outweigh the reasons not to.
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