Why it’s Never a Bad Time to Buy Property Even if Mortgage Rates are Rising
As the effects of COVID-19 continue to unfold, the global economy is adjusting to this new reality. Businesses are shutting down right and left, unemployment levels are skyrocketing, stocks are falling, and citizens of most countries are being urged to stay home. There is a lot of uncertainty surrounding most markets. One of the hardest hit markets is the property market.
Buying property now takes more fortitude than usual. The pandemic economy has led to tightening lending standards, buyers with bad credit are being locked from the best deals, and rising mortgage rates. People’s pessimism toward the property market has hit a record high.
Today, property buyers are experiencing significant challenges, and you may be asking yourself; “Is it a good time to buy a property?” However, this is not the right question to ask. You should be asking; “Is this the right time to buy property for me?” The answer could be yes or no, depending on your goals and your current financial situation. It is never a bad time to buy property if you can afford it even if mortgage rates are rising.
Reasons Why it is a Good Time to Buy Properties
There is a diverse expert opinion on the subject of property investing. Some believe that the prevailing economic situation makes it the right time to buy property, while others don’t consider it the right time to buy.
Here are some of the good reasons why it might be a good time to buy properties right now:
Interest rates are at a record low
As COVID-19 and its associated problems continued to ravage the world, the Fed systematically lowered their rates. While mortgage rates may not have dropped as much as interests do, they have hit historic lows. Lower interest rates offer an opportunity to keep more money in your pocket by locking in lower-cost borrowing.
However, it is important to note that mortgage rates are on the rise. Now is a great time to buy property while mortgage rates are still low.
Real estate prices are likely to start dropping
As the effects of COVID-19 continue to ravage the world, we are seeing financial markets being crushed, and there are fears that the worst is yet to come. This means that there are fears of another financial bust. There are seeing more and more sellers who are motivated to make a sale now in anticipation that their homes may soon become worthless.
At the moment, there is a higher demand for property than the market can meet. However, job loss is on the rise, and soon the property market will have a small buyer pool. This, coupled with the fact that more sellers are intent on selling, means that prices will soon begin to drop. Job losses are also likely to increase foreclosures, which definitely creates more opportunities for property buyers. While it is still early to make a credible forecast of the property market, any savvy buyer will want to take advantage of the current conditions.
One important thing to do is pay attention to why you are buying property. Whether you are buying property for resale in the future or looking to own a home for yourself or your family, you should know what is different in 2021. Let us look at some of the things that you should consider beyond mortgage rates to ensure you make the right decision when you want to buy property.
Buy a Property Only When You Can Afford It
There is a popular saying on Wall Street that you should never try to time the market. The saying also holds true for the real estate industry. The best time to buy property is now. That is, of course, if you can afford it. Buying property when you can afford it is the best approach to the property market. Do not attempt to time property values and mortgage rates because they are almost impossible to predict. What you can do is consider some money-saving tips. If you are ready to buy, a little bit of financial prep will go a long way in ensuring you get the best deal.
Here are some of the things that you should take into account:
If you are buying property for resale in the future, don’t go for the most expensive house on the block. You will find that the biggest or priciest homes on most blocks appreciate the least, and it’s not easy to find buyers for them in the future.
Take the time to inquire about the different expenses that will be associated with your property purchase, from utility costs, association fees, and property tax taxes, and determine whether buying the property you are considering makes economic sense in the long term.
Base your calculations on a price-per-square-foot basis when you make your bid for the property.
In the six months leading up to your purchase, ensure that you don’t make any large purchases or open a new credit card because your lender may see this as an increased risk.
Make Sure You Don’t Become House Broke
As we have seen, you must remember to focus on the other monthly carrying costs and not just the property purchase. These expenses, which include property maintenance, mortgage, insurance, and other house-related costs, drive people to be house poor.
To avoid being house poor, a good rule of thumb is to ensure that you do not spend more than 30% of your income on mortgage and other house-related costs. If you are buying a home, it is important to remember that a house is not an investment. Otherwise, if you consider your home a future investment, you will be setting yourself up for disappointment.
If you can afford property now and it fits your goals, you should buy. Do not be too influenced by the particular conditions that are currently in the property market. Your decision to buy property should be driven by your needs and desires and not the prevailing market conditions.