To buy, or not. That is something many people have struggled with over the past five years. Will home prices decrease further? Will interest rates stay low or continue to rise? Can I time it just right to get the best value for my money? Well, if you are out there looking now, then I would say that you have timed it well.
But now your worry may be, will my offer be better than the competition's offer? News flash: homes are getting looks from buyers, many buyers. And we are seeing multiple offers on properties in varying price ranges. Wait a minute. Is this a flashback to 2006? 2006 is often referred to as the end of the hot market, but if we compare today's market to that of 2006, it becomes clear that now is an ideal time to jump into the housing market.
Looking at Vermont real estate trends, specifically in Chittenden, Lamoille and Washington County, we see that the average number of homes sold in quarter 2 (about 900) and the average sale price (about $280,000) is about the same this year as it was in 2006. The difference is, homes aren't selling quite as quickly in this market even though interest rates are lower now than they were then. In 2006, interest rates in Vermont were at 6.75% and with that rate, a $300,000 loan for 30 years would cost about $1945 a month in principle and interest. Now, if you were to get the same loan with today's interest rate of 4.75%, it would cost $1565, about $400 less. It is also important to note that people are employing much more creative financing these days. In Vermont in 2006, the home selling market was fueled almost entirely by conventional loans. Now, in 2013, there are many more low-income loans, cash sales, and with many veterans returning from war, there is a significant increase in veteran's association financing for home sales. There are indeed more financing options available to you than just the conventional loan.
If you look at the numbers, it is a buyer eye-opener. Supply is low; demand is high. The Vermont real estate market, as well as national trends, show that inventory has been decreasing in the last six months and while Interest rates have risen 1 point in last year and 2 points in previous five years inventory are having a more significant impact on the market. National Association of Realtors Chief Economist Lawrence Yun said last month that compared to interest rates "the bigger concern remains too few homes available for sale, especially among homes in the lower price range" (http://speakingof realestate.blogs.realtor.org). So, while there has been talking about rising interest rates, they remain historically low and owning is often a more economical choice than renting. The mortgage you will pay on that $250,000 home is comparable to what you would pay to rent a modest 2-bedroom house.
Let's not forget the other advantages of owning your home. Every month you pay your mortgage you are putting money into your pocket. You have a tax deduction as well as a payment toward equity. And don't forget appreciation. All market indications show that home prices have leveled, with the average sale price remaining about the same in the Vermont real estate market over the past seven years, leaving us to expect housing prices to see modest appreciation in the next few years and beyond. That should prompt you to start your home search.
As beautiful as all of this sounds, it still is only attainable for those who feel a sense of job security, have taken care of their credit, and have managed to save money for their required down payment and closing costs.
Go out into the home buying arena prepared. Talk to your lender to see what you can afford. Go out there with your eyes wide open. You may be surprised. And as always, feel free to contact us at New England Landmark Realty with any questions you may have.