BY TODD PRUITT
One year ago, the average interest rate on a 30-year, fixed-rate mortgage was about 3%. Today, that number has more than doubled to around 6%.
Does this mean you should wait on the sidelines to buy a home? Here are seven reasons why now might be the right time to act.
1. The Number Of Homes For Sale Is Increasing
Compared to pre-pandemic times, the inventory of homes for sale remains low. However, according to Economic Research, housing inventory has grown considerably. In fact, The Colorado Association of Realtors (CAR) reports there are over 50% more homes in Colorado for sale now compared to January of this year.
This means that you and your trusted real estate advisor have more properties to consider when searching for your dream home. Higher numbers of available homes lead to fewer bidding wars and the potential for more offers being accepted at or below asking price.
2. Home Prices Are Steadily Appreciating
Colorado prices have appreciated 8% since January 2022, and the 60-year national average is at 4.6% per year. Experts don’t predict that home prices will fall in the foreseeable future. Instead, nationwide home prices are projected to continue appreciating, albeit at a more moderate pace compared to the past year.
Fortunately, once your home purchase is finalized, you can begin taking advantage of appreciation to help increase the value of your investment.
3. Homeownership Can Grow Your Wealth
A home is a tangible asset that typically increases in value the longer you own it. Together with your regular mortgage payments, you’ll build equity in your home, boost your net worth, and improve your stability with each month that passes. Freddie Mac puts it this way:
“Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
4. Buying A Home Helps Shield You From Rising Rents
According to census data, the median monthly gross rent in Colorado has increased every decade since the 1950s. The good news is that buying a home can help you avoid rising rents while also stabilizing your expenses.
5. Interest Rates Are Still Historically Low
While the average 30-year fixed interest rate currently sits around 6%, by historical comparison today’s interest rates still represent a potentially great opportunity to lock in your monthly payments by buying your first or next home.
Working with an experienced mortgage advisor who has strong knowledge of the market and the various products available, you can see the options that meet your personal comfort level of payment and long-term financial strategy.
6. Change Is the Name Of The Game
Looking at the past couple of decades, the market has undergone some wild swings, which has caused some to question the long-term value of real estate.
Zooming out and looking at high-level trends, The National Association of Realtors (NAR) reports that home values have increased an average of 5.2% each year between 1972 through 2014, and they’re up an average of 7% over the last 10 years. If you can hold steady during a constantly changing real estate market, you could stand to earn an attractive amount of equity.
7. Make A Community-Level Impact
Homeownership is key for the development and stability of communities at a local and state level. A sense of pride not only for the home, but also for the neighborhood and surrounding communities promotes civic engagement, improved access to economic and educational opportunities, increased volunteerism, and a greater sense of attachment by building relationships and offering children the benefit of social continuity. So, if you’re looking to make a local — not just a financial — impact, homeownership could be your path forward.
The bottom line is that if you’ve waited on the sidelines during the craziness of the past few years, now may be a great time to buy a home. Even with higher interest rates, homeownership still represents a sound investment strategy, especially over the long term.
Todd Pruitt is the Senior Mortgage Advisor & Vice President of Production for Cherry Creek Mortgage. He can be reached at 303-331-4456.