Is Buying a Home Today a Good Financial Move?
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It's safe to say that 2020 has been a challenging year. A global pandemic coupled with an economic recession has caused heartache for many. However, it has also encouraged more Americans to reconsider the meaning of “home.” This search for a place better equipped to fulfill our unique needs, along with record-low mortgage rates, has made the demand for home purchases catapult.
This increase in demand, on top of the severe shortage of homes for sale, has also caused more bidding wars therefore home prices are appreciating rather dramatically. In turn, some have become cautious about buying a home right now.
The truth of the matter is, even though homes have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. Falling mortgage rates can be contributed to this interesting statistic.
Here's a good monthly mortgage payment example on a $300,000 house one year ago. Compare it with that same home today, after it has appreciated by 6.7% to $320,100:Compared to this time last year, you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year.
But isn’t the economy still in a recession?
Yes, it is. That, however, may make it the perfect time to buy your first home or upgrade to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:
“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”
While processing that information, contemplate the simple fact that homeowners have 40 times the net worth of renters. According to Odeta Kushi, Deputy Chief Economist for First American Financial Corporation:
“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”
One Last Thought
With home prices still going up and mortgage rates potentially rising as well, buying your first home, or moving up to a home that better suits your needs, is likely a sensible decision. Please reach out to Real Advantage Partners with your questions and needs... we are thankful to be your real estate resource!