Buying a new home is exciting, but a little scary too. In fact, a survey from Homes.com found that 40 percent of Americans say buying a new home is the most stressful event in modern life. Another 44 percent said they felt nervous during the home-buying process. How can you relieve some of that stress? Buy at the optimal time. How do you know when that is? Check out this advice from Jock Ochiltree, real estate advisor from Reno, Nevada, who has guided over 200 clients in buying or selling a home.
When Interest Rates are Low and Stable...
The Federal Reserve periodically raises interest rates in an effort to keep inflation low and stabilize the economy. Two years ago, home buyers could get a 30 year fixed-rate mortgage for under four percent. Early this year, rates rose to between 4.5 and 5 percent. Just this week, rates dropped to 4.34 percent, a 52-week low. Even more exciting, the Federal Reserve announced it will not raise rates for the rest of the year.
For home buyers, low interest rates play a huge factor in creating an ideal buying environment. Does half of a percentage point really make that big of a difference? Yes! Consider this example. You get a 30-year fixed rate mortgage for $240,000 with an interest rate of 5 percent. Your monthly payment would be $1,288.37. Over the life of the loan, you'll pay $223,813.88 in interest. That same loan at 4 percent would drop your monthly payment to $1,145.80 and your total interest paid to $172,486.82. One percentage point dropped this mortgage by more than $130 a month and saved more than $50,000 over the life of the loan.
If you are in the market for a new home, jump when rates are low and stable. Even if you are thinking of selling, putting your home on the market when interest rates are low will ensure there are plenty of buyers competing in the market to optimize your selling price.
When There are a Lot of Homes on the Market...
The housing market is just like any other industry. Supply and demand drive prices. When there are an abundance of houses for sale, sellers know they have to compete for a buyer. They will be much more willing to negotiate when they know their neighbor is selling a comparable house for $10,000 less. While the economy and other factors can drive inventories, spring and summer are usually the optimal selling times, when inventories are high.
When the Economy is Doing Well...
Your own personal economy is usually your highest priority when buying a home. Can I afford to buy? However, looking at certain key indicators can give you an indication of what's happening on a broader scale. For example, look at new construction statistics for your area. Are they building new subdivisions? Even if you don't plan to live in one, new construction indicates a strong economy. Additionally, new homes mean more inventory. As we discussed above, that means prices will be lower. Existing homeowners have to give buyers an incentive to buy old instead of new.
An experienced realtor can help you gauge the buying environment. "Take the time to find a realtor that's more than just a salesperson," suggests Ochiltree. "Focus on a partner who acts as a guide, counselor and advisor." An effective real estate agent will have analytical skills and be tech-savvy, enabling them to keep up with market trends and economic indicators. These technical skills along with customer service ensure a commitment to client satisfaction. Don't go it alone. Find your real estate partner.