Interest rates have begun to rise and likely will climb higher. Inventory is low and could shrink more. And home prices are increasing—and they’re not predicted to fall any time soon. Here, Realtor.com offers three important reasons to jump aboard the real estate train now before it’s too late.
1. Rates are rising
In 1981, when mortgage rates hit 18 percent and seemed to rise daily, single-digit rates seemed like an impossible dream. Last August, however, rates on 30-year mortgages bottomed out at 3.55 percent. Now that the Federal Reserve finally decided to raise its key interest rate, mortgage rates have been climbing slowly. Today, the average rate is just above 4 percent; by 2019 or 2020, rates could easily climb to 6 percent. Take heart, though. Rising rates aren’t necessarily a deal breaker for buyers. The National Association of Realtors calculated that a rise from 4.2 percent to 5 percent would increase average monthly mortgage payments by only $90. And if you take the long view, those higher rates still are historically low. Another upside: When rates go up, competition and prices often go down, with sellers often more willing to be flexible on pricing.
2. Inventory is shrinking
In November 2016, there were only 1.85 million homes for sale. That’s almost a 10-percent drop from the year before. And it continues a trend of steady decline since just before the housing crash, when inventory peaked.
Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that, in most areas of the country, buyers have more homes to choose from today than they will next year.
Or even next month. Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.
3. Home prices still are rising
Home prices now stand higher than before the 2007 crash, increasing 5 percent from 2015 to 2016. And housing experts expect an additional 2 percent to 3 percent jump in 2017. How high prices will rise and how long they’ll remain high is anyone’s guess. The good news? If you jump into the market pronto, you just might make it before those doors close.