With housing inventory still at historic lows and the average median home sales price reaching a record high in May of just over $350,000 for all home types, you may be wondering if buying a home in this over-the-top market is still a good investment. An array of factors has pushed the housing market to this point, including pent-up demand from the pandemic, low inventory, and historically low mortgage interest rates.
However, homeownership remains the most direct path to wealth creation in America for all but the nation’s highest earners. In fact, according to a consumer finance survey by the Federal Reserve, homeowners have 40 times the household wealth of renters. That’s because, for most Americans, the majority of their net worth is tied to the value of the residential property they own.
So if you’re in the market to buy, it’s still hard to go wrong in converting from renting to homeownership. Here are four reasons why 2021 is still a good time to buy:
1) Interest rates remain historically low.
Mortgage interest rates remain historically low with the average 30-year fixed-mortgage APR standing at 3.26%. You likely won’t find a better time to take out that 15- or 30-year mortgage loan since those rates are expected to steadily move upward as the year progresses The sooner you can lock in a rate, the better.
The lower-than-normal monthly payments resulting from low-interest rates mean your house-buying budget is bigger, too, if you’re looking to upgrade to a larger home or a pricier neighborhood.
2) You likely can sell your current home quickly and with a handsome profit.
While national housing inventory is slowly climbing again, demand for housing continues to outweigh current supply. Total national housing inventory at the end of May stood at 1.23 million units with 2.5 months of supply, according to the National Association of Realtors (NAR). That means if you already own a home and are looking to upgrade to a newer or larger one, you’re still in the best seller’s market in years. But it won’t last forever, so the sooner you can get your current home on the market, the more likely you are to make a solid return when you sell. That means more funds for that down payment on your next home.
3) Home values will continue to appreciate, growing your net worth.
The housing crash of 2008 aside, history tends to show that real estate appreciates. According to NAR, in the first quarter of 2021, 89% of metro markets showed double-digit growth home price appreciation. And national median home prices rose 16% year-over-year. That kind of return on investment is even hard to manage in the stock market. If you buy a new home now, you’ll likely only see its value grow in the months and years to come. Even as more housing inventory comes online and prices normalize, most homeowners still stand to see their home values grow. CoreLogic predicts home prices will grow 3.4% year-over-year between May 2021 and May 2022.
4) You may have more flexibility to live where you want.
If pandemic lockdowns shifted how you work with new opportunities to work from home full-time or part-time, you may have greater flexibility than ever before in choosing where to live. If you no longer have to worry about being close to the office or to the metro for easy commuting, now may be the time to buy that country home or a larger residence in the suburbs. Don’t overlook the future of the market in which you’re buying, however. While home prices might be appreciating in a mountain vacation town, as city dwellers fleeing the pandemic have snapped up homes at higher prices, make sure the market has long-term stability and growing power. That means the locality has a strong economy with business and employment growth.
Ready to take advantage of historically low-interest rates and a booming housing market to move from renting to owning? Jumpstart your mortgage application process with OVM Financial’s easy QuickStart application.
GET A FREE FIRST TIME HOME BUYER GUIDE
Learn if an FHA Loan is right for you, what the steps are, how to get pre-approved, and more.