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Buying a Home: Should You Do it Now or Later?

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Hour GlassLast month, the Federal Reserve, in a unanimous vote, decided to further decrease its bond purchasing. The bond purchases were the government’s stimulus package created to keep long term mortgage interest rates artificially low in order to help drive the housing market. Most experts believe that tapering will cause interest rates to increase as we move through the year.

Interest rates have remained relatively stable since the onset of the tapering in December. This is probably because the first round of increases had already been ‘priced into’ the equation last summer when rates skyrocketed by over a full percentage point just on the speculation that tapering would take place later in 2013.

However, as we move forward, most analysts believe rates will start to rise culminating in a rate close to a full percentage point higher than current rates by this time next year. For example, Freddie Mac, Fannie Mae, The Mortgage Bankers’ Association and the National Association of Realtors have all recently projected rates to be between 5-5.4% at this time next year.

Bottom Line

If you are a first time buyer or a move-up buyer, the cost of the mortgage on your new home will probably increase as we move through the year. If the timing makes sense, buying sooner rather than later may save you a substantial amount of money over the long term in lower mortgage payments.

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4 Responses to “Buying a Home: Should You Do it Now or Later?”

  1. Rich Spaulding February 15, 2014 at 10:32 pm # Reply

    Buying now (if you can afford it) makes sense. If the projections from Fannie Mae and others are accurate, a person could be losing thousands of dollars by waiting until next year.

  2. Martin Howard February 17, 2014 at 3:49 am # Reply

    I agree, if those numbers are correct you could save thousands of dollars. If you’re a first time buyer you should also consider the location, as the market value varies from one city to another. Forbes.com wrote a nice post on this – http://www.forbes.com/sites/erincarlyle/2013/12/26/best-buy-cities-where-to-invest-in-2014/

  3. John Sheldon February 19, 2014 at 12:32 pm # Reply

    I totally agree. If you want better prices, buy now, as there will be more competition and more people in the market come spring and summer months. That’s the way it has worked historically and there’s no reason not to believe that it will also work that way this year.

  4. Judy Carlough March 1, 2014 at 7:43 am # Reply

    Buyers should use their high school math to see why buying now probably makes sense for almost everyone: if the market cost is rising 3%-5%-7% or more, and the cost of money is going above 5+%, you’ll be paying more and MORE for the home you can afford today. The same home — not a bigger one, not one with more upgrades, not one in a better neighborhood! An exception might be if you currently have a VERY low down payment but will have saved a 20% down payment next year. Even in this scenario, you’d probably be better off borrowing from Friends & Family or taking money out of a 401K to get into the market this year.

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