Should You Buy a Home This Summer?
If the thought occurred to you that you might want to buy a home this year, you are probably on an emotional roller coaster.
First, the Federal Reserve began to cut interest rates as the coronavirus pandemic began to affect the US economy. In theory, this would be a great time to buy a home, apart from all the worries about physical distancing.
But then lenders raised rates to levels that seemed unusually high given nearly all other economic indicators. Several factors contributed to this rate hike: lenders were trying to stave off a tidal wave of refinancing applications at the time they were starting to draw up teleworking plans; at the same time, fluctuations in the bond market also led to an increase in rates.
On top of that, many people took their homes off the market, believing that no one would want to buy a home during the pandemic. This has forced real estate agents to get creative to keep up with the demand for home purchases.
And now mortgage rates have dropped again. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is now 3.21%. And some borrowers with excellent credit histories could get an even better deal: According to Mortgage News Daily , the average rate on a 30-year fixed mortgage this week fell below 3% for “ideal scenarios.”
After this short-term hike, interest rates have remained below 3.3% for six weeks, up from 3.82% a year ago, CNN notes .
So if you are looking to buy a new home, this summer might be a good time to buy. And it goes against the more traditional buying strategy.
Last year we noted that the first week of fall is a great time to buy a home. Cause? Less competition. The kids are back at school, families are busier, and the salespeople whose homes are up for sale most of the summer are ready to close the deal.
This strategy is also applicable later, in the fall. In October, sellers often show up willing to close a deal because they want their sale to be completed before the tax year expires.
But let’s be honest about 2020, which, I must remind, we still live in : throw strategy out the window. Typical stereotypes about the “best time” to shop this year will be unpredictable and not worth striving for! If a home you like is on your budget now, buying can mean significant long-term savings on your mortgage compared to if you decide to wait until fall or even 2021.
Yes, the Federal Reserve says it plans to keep interest rates low until 2022, but when it comes to mortgages, small fluctuations in those low rates can still significantly affect how much you pay over time.
To learn more about buying a home, watch this video: