The real estate market
Assuming you have your personal financial situation under control, your next consideration is the economics of the housing market, whether in your current location or where you plan to relocate. A home is an expensive investment. Having the money to make the purchase is great, but it doesn’t answer the question of whether or not the purchase makes financial sense.
One way to do this is to answer the question: is it cheaper to rent than to buy? If buying is less expensive than renting, this is a strong argument for buying.
Likewise, the long-term implications of buying a home are worth considering. For generations, buying a home has been almost a guaranteed way to earn money. Your grandparents could have bought a house 50 years ago for $ 20,000 and sold it for five or ten times that amount 30 years later.
While real estate has traditionally been viewed as a safe, long-term investment, recessions and other disasters can test this theory and make would-be owners think twice.
During the Great Recession, many homeowners lost money when the housing market collapsed in 2007 and ended up owning homes that were worth far less than the price they were bought for many years later.
If you are buying the property with the belief that its value will increase over time, be sure to take the cost of mortgage interest payments, property improvements, and ongoing routine maintenance into account in your calculations.
The economic perspective
Along the same lines, there are years when property prices are depressed and years when they are abnormally high. If the prices are so low that it’s obvious you’re getting a good deal, you might take it as a sign that it might be a good time to make your purchase. In a buyer’s market, low prices increase the chances that time will work in your favor and make your home appreciated in the future.
It is too early to say what will happen to house prices in 2021. But if history repeats itself, we can expect a decline in house prices due to the COVID-19 pandemic and its dramatic impact on the economy.
Interest rates, which play an important role in determining the amount of a monthly mortgage payment, also have years when they are high and years when they are low. Obviously, the lower it is, the better. For example, a 30-year (360-month) mortgage on a $ 100,000 loan at 3% will cost you $ 422 per month. At an interest rate of 5%, it will cost you $ 537 per month. At 7%, it jumps to $ 665. So if interest rates go down, it might be wise to wait before buying. If they are increasing, it makes sense to buy as soon as possible.
Period of the year
Seasons of the year can also influence decision making. If you want the widest variety of homes to choose from, spring is probably the best time to shop. “For sale” signs tend to bloom like flowers when the weather warms and the lawns turn green. Part of the reason is related to the target audience of most families: families hoping to relocate until their children finish the current school year, but want to settle down before the new year starts in the fall.
If you want vendors who might see less traffic, which might make them more flexible on pricing, winter might be better to look for a home (especially in cold climates), or the height of summer for tropical states (the low season for your area, in other words). Stocks are likely to be smaller, so options may be limited, but sellers are also unlikely to see more offers during this time of year.