Throughout the first two years of the COVID-19 pandemic, interest rates were historically low, resulting in a boom in home purchases and refinances. The party seems to be over, though, with indications from the Federal Reserve that the rate will increase as early as March 2022 to help curb inflation.
While mortgage rates have already been creeping up since the beginning of the year in anticipation of the Fed hikes, the rate is still slightly lower than before the pandemic. The problem is that the housing inventory continues to be very low, which will keep prices up. According to a February 2022 National Association of Realtors study, households earning $75,000 to $100,000 annually can afford to buy 51% of the active housing inventory. In 2019, that same household could purchase 58% of the homes for sale. However, the rising rates could cause home prices to drop. As rates increase, buyers will pull back as homes become less affordable, and less competition could result in lower home prices. This could also end such risky tactics as waived inspections or appraisal contingencies.
So, should you wait to purchase a home in 2022? Here are four reasons why now may be the time to buy:
- Rates are anticipated to rise between now and the end of the year, which can affect a borrower's ability to qualify for a loan.
- According to Zumper, rent prices for a median one-bedroom apartment jumped 12% last year, an all-time high. The projected increase in 2022 is 12%.
- Even though the inventory is still low, the market should stabilize with less competition.
- FHA loan limits for most single-family homes increased to $420,680 in 2022, nearly $65,000 more than last year.
But when buying a home, you must consider your financial situation. If you plan to stay in this home for less than five years, you may not be giving your home enough time to appreciate to cover closing costs. If the inventory is meager where you want to live, you may want to wait until the market levels out. If you can significantly improve your credit score or debt-to-income ratio by waiting a couple of years, the money saved with a lower rate could justify holding off.
If you need help determining whether now is the right time to purchase a new home, talk to the lending experts at NASB at 888-661-1982 or click here for more information.
