Becoming a first-time home buyer is an exciting undertaking as you start to live the American dream of home ownership. After living through the worst recession since the Great Depression, you may feel that buying a home for the first time has become a distant dream. But that perception may not be accurate. Right now is just about the best time to be a first-time home buyer – and here’s why:
1. Home Prices are Hitting Bottom
According to the Case-Shiller Index®, home prices in the Boston and New York City metropolitan areas are down 19% and 25%, respectively, from their peaks. And recent data from the National Association of Realtors® shows that existing home sales in the Northeast increased 5.5% year-over-year in February and inventory dropped almost 20%. If you are thinking about waiting for the bottom, just remember that home price data lags by a few months so you will only recognize that prices hit bottom when it is too late.
2. Interest Rates are at an All-Time Low*
Not only can you buy the home of your dreams at a low price right now, you will benefit financially from historically low mortgage interest rates -- below 4% in many cases. When buying a home with a $200,000 mortgage, the principal and interest payment on a 30 year fixed-rate mortgage with a 4%* interest rate will cost $956. If you are to wait until rates rise to 5%, your monthly payment on the same house will be $1,074. By purchasing now, you can pay $1,400 less mortgage interest each year.*
3. Rental Payments are Going Up
If you need another reason for buying a home, rents are going up according to data from the Local Market Monitor, a national real estate forecasting company. In the Hartford, New York City and Providence metropolitan areas, monthly rents increased 2.0% to 2.5% last year and are forecasted to increase another 12% to 13% over the next three years. If you rent in the Boston metropolitan area, the news for you is even worse. Rentals increased 4.4% on average last year and are forecasted to go up another 16% over the next three years. Wouldn’t those extra rental payments be better used to build equity in a home you own?
4. It’s a Buyer’s Market
During the height of the housing bubble, home buyers were bidding up home prices while sellers watched and smiled. Sellers nowadays are the anxious ones, wondering whether they will get a bid on their home anywhere near the listed price. But the tide is showing some signs of changing in some markets. If you need additional proof that it is a great time to buy a home, just listen to Warren Buffet, who stated during a February CNBC interview, “I would buy a home and I’d finance it with a 30-year mortgage.” He went on to say that it is a “terrific deal.” And if you need a 30-year mortgage or any other type of mortgage, Webster Bank is ready to take your application!
*Rate quoted as an example and is not guaranteed. Actual interest rate you will receive is dependant upon a variety of factors, including credit qualifications, household income, debts and other underwriting criteria. Rates are subject to change on a daily basis. Total monthly payment does not include property taxes or homeowner’s insurance. All loans subject to credit approval.