Is Now a Good Time to Buy a Second Home?
Looking at purchasing another house? If you’ve browsed real estate listings recently, you’ll know that the market is as hot as it’s ever been. Due to events of the previous year, supply lines were interrupted, construction on new homes was all but halted, and many people concerned about job security decided to hold onto their homes rather than selling.
As a result, housing inventory is at a historic low. According to the New York Times, the number of homes available for sale has fallen dramatically in almost every U.S. housing market, and pricing has spiked in response. In one case, a D.C. area house received 76 all-cash offers and eventually sold for almost 70 percent over asking price.
For buyers looking into a second home, there are significant pros and cons to consider given the current state of the market. Here’s what you should think about.
Should the Pandemic Play into Your Plans?
Yes and no. The logistics of house buying haven’t changed much. Many real estate listings, especially on higher-end houses, include 3D virtual tours, and realtors will allow buyers to book time slots to tour the house alone without interacting with other people. Inspectors and contractors will wear masks, documents can be signed virtually, and even the closing process doesn’t require an in-person meeting.
On the other hand, the effects of the COVID-19 pandemic — specifically, the drastically reduced housing inventory across the country — aren’t going away within the next year or two. Supply lines are still operating at reduced capacity, leading to spikes in pricing on basic construction materials. Lumber alone has more than tripled in cost.
Where Are Interest Rates Headed?
Interest rates are as low as they’ve ever been. Federal Reserve rates hovered between zero and 0.25% in the recovery from the 2009 crash, then ticked up to around 3% in 2018 before dropping back to essentially zero in early 2020. We don’t have firm promises from the Fed going forward, but most economists don’t expect significant rises through at least 2023 in an effort to stimulate the recovering economy.
The upshot is that qualified lenders can easily find mortgage rates around three percent, depending on the type of loan you’re interested in. These lower rates can actually offset the high purchase prices.
Reach out to one of our Mortgage Loan Originators and we can run the numbers on current rates and prices.
A year of being at home has drastically changed what people are looking for in their homes. According to one San Francisco realtor, buyers are focusing on houses with completely private spaces rather than nicely appointed common areas like patios and gyms. With the rise of work-from-home spaces, offices are a higher priority than ever.
There’s also been an increased interest in rental-by-owner properties like Airbnb and Vrbo. During the height of the pandemic, hotels everywhere closed down over safety concerns, but families felt much more comfortable renting an entire home to themselves. Owners of such properties may be less inclined to sell as a result of this recent spike in rental income, reducing inventory in desirable locations even further.
The decision to buy a home ultimately comes down to your personal finances. A mortgage is a long-term investment — if you can lock in today’s extremely low rates now, you’ll be benefiting from reduced interest for decades. Let us work with you to help examine your cash flow and other liabilities, look for prices in the areas you’re most interested in, and talk about the kind of loans you might be eligible for. If you can afford it, now could be an excellent time to buy.