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Mixed Housing Signals Are Confusing Homebuyers: How to Tell It’s The Right Time For You To Buy

By Alice Kantor

The US housing market is sending mixed signals, leaving potential buyers confused about whether now is the right time to jump in or stay on the sidelines.

Mortgage rates fell Thursday for the first time in three weeks, but are still well above where they started the year. Pending home sales plunged in June by the most since the early days of the pandemic, yet prices are still rising by double-digits. Large numbers of buyers are walking away from deals, but inventory across the country remains near historic lows.

A “For Sale” sign outside a house in Albany, California, US, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.

The same is true in some of the frothiest global markets, where early signs of cooling are clashing with still-high prices in cities from Canada to New Zealand.

Throw in surging inflation and a volatile stock market, and it’s enough to make even the most confident buyer hesitate. Here’s what financial advisers say about buying a home right now:

Buy Now If You Can

Slowing price growth, rising inventory and waning bidding wars suggest that a potential homebuyer has more options today and more leeway to negotiate compared to last year, experts say. In addition, inflation typically leads to higher rents, which makes buying look relatively more attractive and can push home prices higher over time.

Now could be the right time to buy, as long as you can find the right home and an affordable mortgage rate, said Helen Morrissey, senior analyst at financial services company Hargreaves Lansdown. 

“If you can afford to purchase a home now and you plan to stay in it for a while, then now could still be the right time to take the plunge,” Morrissey said. “Home prices will probably continue to rise in coming years, so don’t hold back on a purchase because you’re expecting them to drop.”

However, experts caution against buying solely to hedge against inflation. Many other factors — including location and the state of the broader economy — can affect a home’s value.

“You really can’t — and shouldn’t — try to time the housing market,” said Zillow senior economist Jeff Tucker. “The best time to buy a home is when it’s the right home, at the right time, and an affordable monthly payment for you and your family.”

Don’t Stretch Your Budget

Ensuring that you can afford your mortgage is paramount amid the soaring cost of living and squeeze on incomes. 

Having some wiggle room for the rising cost of everyday expenses like food and gas, as well as keeping your emergency safety net intact, is necessary to ensure that a house purchase doesn’t turn into a financial nightmare, Tucker said.

“Assess whether it’s safer for you to rent or buy at the moment,” he said. “Although building equity is the main avenue to growing your wealth over time, taking into account your current personal financial circumstances is important too.” 

Secure The Right Mortgage

The typical monthly mortgage payment is 75% higher today than it was in June 2019, according to real estate company Zillow, and mortgage rates are expected to rise further this year. As a result, securing a mortgage at a favorable rate is a key step for potential homebuyers, said Steve Kutz, regional president at investment company BNY Mellon Wealth Management.

Although the starting rate for a fixed-rate mortgage is typically higher than that for an adjustable one, it also carries fewer risks, Kutz said. Adjustable-rate mortgages, or ARMs, typically offer a fixed term of a few years followed by a variable rate on the remainder of the loan, which will rise or fall alongside market rates. 

He also recommends ensuring the mortgage’s term matches the time you want to spend in the property in order to avoid incurring early repayment fees. 

“It’s more important than ever to secure the right mortgage,” Kutz said. “If you know you are only going to own the home for five years, then you should consider a seven-year variable-rate mortgage instead of a 30-year fixed rate one.” 

Avoid Fixer-Uppers

Construction costs skyrocketed this past year and workers are still in high demand, meaning buying a fixer-upper might not be the best idea as renovations could easily turn into a costly quagmire.

Favoring turnkey homes or those in need of small cosmetic changes might save you a lot of stress and money, experts say. 

If you do buy a home that needs fixing, make sure to factor the inflated costs of materials and extended wait times for renovations into your offer price, said Zillow’s Tucker. 

“Buyers need to understand the true cost of the construction work needed on a home before they submit an offer,” he said.

Look For Cheaper Areas

With first-time homebuyers facing a historic affordability crisis, being flexible in terms of property and location could help get you on the property ladder, said Tucker. Condos and townhouses are often more reasonably priced than single-family homes, and they come with fewer long-term maintenance costs, he said.

Looking for a home in an area away from expensive large urban hubs could also help, depending on how frequently your employer requires you to be in the office. “Hybrid work has opened up new housing options for many workers in less-expensive suburbs and cities. That’s something to take advantage of,” said Tucker. 

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