If you are one of the many people who is carefully considering buying a home at this point in time, you are probably getting a lot of advice from friends and family. While they may have your best interests in mind, they may not be completely aware of your needs and the current market.
Here are three important questions you should ask before buying in today’s market:
1. Why am I purchasing a home?
This is an important question to consider answering. Forget your financial situation for a moment. Why did you start to consider buying a home? For most people, that reason has nothing to do with your finances. A study conducted by the Joint Center for Housing Studies at Harvard University shows that there are four major reasons people purchase a home and none have anything to do with money:
• A good place to raise kids and provide them with an education
• A home where you and your family members feel safe
• More square footage for your family
• Control of your surroundings
What non-fiscal benefits will you and your family gain from home ownership? The answer to that question must be the primary reason you decide to buy.
2. Where are home prices headed?
When looking at future home values, we prefer the Home Price Expectation Survey. Each quarter, Pulsenomics surveys a nationwide panel that consists of over one hundred economists, real estate experts and marketing strategists. The survey aims to help discover where home prices are headed in the next few years. This is then averaged into a single number.
The expert projections from the latest survey were:
• Home values, appreciation of roughly 4.3% in 2014.
• Cumulative home appreciation will be about 28% by 2018.
• Even those experts making the most bearish quartile from the survey still projecting a cumulative housing appreciation of over 16.8% by 2018.
3. Where are mortgage interest rates headed in the future?
Buyers must be concerned about more than just home prices. All ‘long term cost’ of a home can be dramatically impacted by any increase in mortgage rates.
Many experts, including the Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac all believe that mortgage interest rates will increase by roughly one full percentage point in the coming year.
Only you and your family know for certain when the best time to purchase a home should be. Answering these questions can help you make the right decision.