3 Trends Home Buyers Should Watch in February
by Maurie Backman | Updated July 19, 2021 - First published on March 8, 2021
Looking to buy a home? Here's what you need to know right now.
Buying a home is a major undertaking, and one that requires a fair amount of research. If you purchase a home at the wrong time, you could pay more than you're comfortable with and get stuck with a mortgage you can't easily afford. Here are a few trends you should be aware of if you're looking into buying a home this month.
1. Rising mortgage rates
Though mortgage rates remain competitive on a historic level, one thing applicants should know is that they've gone up in recent weeks. As of this writing, the average 30-year fixed mortgage is 2.955%. But three weeks ago, the average 30-year mortgage rate was 2.803%. This means for every $100,000 you borrow, you'll pay $8 a month more in principal and interest than you would have three weeks ago. While $8 may not seem like a big deal, it adds up over the long term. And the more you borrow, the higher that difference will be. Use a mortgage calculator to see what monthly payment you may be in line for based on the specific amount you expect to borrow.
This isn't to say you should rush out and get a mortgage immediately in case rates shoot up higher. To be clear, today's rates are still quite low compared to where they've been over the past 10 years. But in the context of the past six months, they are starting to climb. So if you're serious about buying a home, you may want to lock in a home loan sooner rather than later.
2. Inflated home prices
Rising home prices are keeping a lot of buyers out of the market. In January, the median price of an existing home sold was $303,900, according to the National Association of Realtors. That's a 14.1% increase from January of 2020. If mortgage rates keep rising, demand for homes could begin to decline, at which point home values may follow suit. But right now, if you're going to move forward with a home purchase, you'll need to prepare to pay up.
3. Limited housing inventory
As of the end of January, there were 1.04 million homes available for sale in the U.S. That may seem like a lot, but it's actually a 26% drop from a year prior. In fact, those 1.04 million homes represent just a 1.9-month supply, which is the lowest recorded level since 1982. This lack of inventory has caused home prices to skyrocket due to high demand. But that doesn't just mean you might pay a lot more for a home today. It also means you may need to compromise on the home features you really want.
For example, you may need to settle for a fixer-upper that costs you a lot of money to renovate. Or, you may need to settle for less square footage, which could be problematic for a growing family. Of course, this doesn't mean you definitely won't find a home that suits your needs in today's market -- but, you should be prepared to have limited choices.
Whether you're looking to buy a home immediately or at some point this year, it's always a good idea to keep tabs on the housing market. You may decide to move forward with a home purchase in spite of the trends above. But it's important to be aware of them as you work through your options.
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