Is 2021 a good time to buy a house?
Buyer demand increased in 2020 as low mortgage rates made homeownership more affordable and attractive. But if you missed the boat in 2020, is 2021 a good time to buy a home? Here’s why that’s potentially – and isn’t – a good idea.
The advantage of buying a house in 2021
The main advantage of buying in 2021? You risk catching a low interest rate on your mortgage.
Mortgage rates came close to historic lows at the start of the year. They stayed that way for much of January and the first part of February. During the second half of February and through mid-April, however, rates rose steadily. But over the past week, rates have started to drop, making them more attractive to buyers right now.
While rates may continue to rise in 2021, they are unlikely to peak in the near term. The Federal Reserve is committed to keeping interest rates low until 2023. The Fed does not set mortgage rates, but its policies tend to influence the movement of mortgage rates. If the Fed keeps interest rates low, there’s a good chance mortgage rates will stay low for at least a year, if not longer. And the lower your mortgage rate, the less you will pay each month on your mortgage and the less interest you will pay.
The downside of buying a house in 2021
Strong demand from buyers has pushed up house prices. There are fewer sellers, so potential buyers have to deal with rising house prices.
As such, if you buy a home in the first half of 2021, you will likely pay a premium. That high home price could wipe out a good chunk of your mortgage savings, even if you get a fairly competitive rate on your home loan.
In March, the national median listing price was $ 370,000, up 15.6% from the previous year. And since this is a sellers market, many buyers go above the asking price just to get an offer accepted.
Another problem to consider is that the housing inventory is very limited. In March, the national inventory was down 52% from the previous year.
There is a good chance that the housing inventory will pick up as the weather warms. Spring has historically been a peak time to register a house. But right now the real estate market is still short on properties, which could make things more difficult for potential buyers. And this year’s spring real estate boom may not happen given the current situation with the pandemic.
Should you buy a house in 2021?
Mortgage rates and housing market conditions are not the only factors to consider. Buying a home in 2021 also depends on your personal financial situation.
If you have a stable job, enough savings for a solid down payment, a great credit rating, and low debt levels, you’re in a good enough position to buy a home for the short term. You will just need to shop around to find the best mortgage lender for you.
But if you’re not in such a strong position, it might be to your advantage to postpone your home search. You may be worried about being made redundant at work, or you may not have a lot of money set aside for a home purchase. Or maybe you have a lot of debt, or your credit score needs work. It may be a good idea to wait even if house prices drop in 2021, inventories open, and mortgage rates remain competitive.
Buying a house at the wrong time is a mistake that could haunt you for years to come. Don’t rush to buy in 2021 just because mortgage rates are attractive or you’re worried they’ll go up. We don’t know what the next few years have in store for mortgages. You may well be more successful as a home buyer in 2022.