Housing prices are increasing and so are mortgage interest rates. New regulations in 2014 also increased closing costs and put limits on the amount of points you could use to pay down your interest rate. They also created stricter guidelines for application approvals.
So if you’re a first time home buyer, you may be asking yourself: should I continue to rent or should I buy in 2014?
TIG adviser Jeff Lewis was interviewed on Fox Business to answer this very question. You can see the full 6:32 minute video here. His prediction is that the housing market will get back to normal by the end of the calendar year.
In his opinion, housing prices are still affordable now compared to housing prices before the real estate bubble that inflated costs tremendously. They are not as easily affordable as they were the last two years, and as interest rates continue to increase and housing prices level up, we will achieve a normal balance by the end of the year.
We’re seeing a greater recovery in the states with the better abilities to create jobs. Housing is still in a very bad state in the Midwest and big cities like Detroit. Mr. Lewis speculated that increased home ownership may be part of the problem because it reduced mobility of people to leave the area and find a better job. The homeowners are stuck in underwater housing and no jobs.
Also, in large cities, home ownership is near impossible, and there isn’t the same stigma attached to being a life-long renter. In fact, renting is considered a bonus because when there are problems like water leaks, the owner of the building has to fix it.
Still, for many people buying a home is achieving an American Dream. The bottom line for future homeowners is to evaluate their expectation of prices and goals. If it is your goal to own a home on a nice tree-lined street and have block parties, then you should start talking with a reputable mortgage officer to find out how much you could pre-qualify for. A knowledgeable real estate agent will also be able to help you find the right home. You may want to save up longer and buy the one home you will stay in, or you may want to invest in a starter home that you can sell to get back your equity, or rent out.
For real estate investors, it’s still a great time to be buying homes that are lower than their normal value. Rental vacancy rates are still at an all time low.
Will you be buying in 2014?
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