{"id":14464,"date":"2020-02-27T08:21:19","date_gmt":"2020-02-27T16:21:19","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=14464"},"modified":"2020-05-15T01:02:40","modified_gmt":"2020-05-15T08:02:40","slug":"buyer-buy-a-house-now-or-wait-until-2021","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-buy-a-house-now-or-wait-until-2021\/","title":{"rendered":"Should I Buy A House Now, Or Wait Until 2021 to Start Shopping?"},"content":{"rendered":"

Is it better to buy a house now in 2020 or wait until 2021 before you start shopping? The answer to this question (like most things in life) depends on a lot. Both the economy and the real estate market come into play, as well as your personal finances and job prospects. There\u2019s a lot to consider<\/a>, and the decision may seem overwhelming.<\/p>\n

Plus, you never know when an unforeseen event (like a pandemic) will influence your decision to buy a house<\/a>.<\/p>\n

Here\u2019s how to think about timing your home purchase.<\/p>\n

\"An<\/a>
Source: (chuttersnap \/ Unsplash)<\/figcaption><\/figure>\n

What does the real estate market hold?<\/h2>\n

According to top real estate agents across the country surveyed by HomeLight, the seller\u2019s market that dominated most of 2019 will slowly shift to a more balanced one during 2020<\/a>. Almost 44% of surveyed agents predicted their local markets will trend toward a softer one, and 15% think that 2020 may even transition into a buyer\u2019s market. This is good news for those hoping to buy in 2020; an increasing number of agents think that home prices will become more affordable in 2020 as a result of the coronavirus<\/a>.<\/p>\n

So what has been fueling the seller\u2019s market over the past few years? One of the biggest issues is not enough inventory: There simply aren\u2019t enough entry-level homes available for the number of people wanting to buy them. Reasons for this include a slow in new home construction, baby boomers staying put instead of selling or downsizing, and the growing demand among millennials for housing.<\/p>\n

\u201cHere on the East Coast, the market is very strong,\u201d said Christopher Cleffi<\/a>, a top-rated New Jersey real estate agent<\/a> with 11 years of experience. \u201cWe have a very limited amount of inventory right now.\u201d<\/p>\n

What this means is that people need to be ready to buy, Cleffi explained.<\/p>\n

\u201cYou have to be ready to pull the trigger and be in the right mindset.\u201d<\/p><\/blockquote>\n

If you want to buy a house this year, be sure you\u2019re prepared before beginning your search in earnest<\/a> \u2014 get preapproved for a mortgage<\/a> and take an honest look at your finances<\/a> as well as where you are in life. You likely won\u2019t be afforded too much time for hesitation or extended self-reflection.<\/p>\n

What about home prices?<\/h3>\n

CoreLogic, a data reporting analysis company, predicted that home prices will increase<\/a> 4.8% in 2020. Is this a lot? From 1987 to the end of 2019, home prices nationally increased at about 3.4% annually, according to Case-Schiller<\/a>. It’s important to remember that these particular numbers are national averages, and were collected before the pandemic. Local statistics can be very different indeed.<\/p>\n

One example of this is that during 2010, Austin, Texas, was in the midst of an extremely \u201chot\u201d real estate market. At that time the annual appreciation rate was close to 9% over 20 years<\/a>. The city continues to see real estate price increases<\/a> in the top 10% nationally.<\/p>\n

Trying to predict whether or not home prices will rise significantly in your local market is a difficult game. Yes, there\u2019s lots of data and speculation available but, ultimately, the questions you probably should be asking should have more to do with your own personal financial picture than that of national averages.<\/p>\n

\"A<\/a>
Source: (Vance Osterhout \/ Unsplash)<\/figcaption><\/figure>\n

New home construction trends<\/h3>\n

New home construction has slowed over the past few years, contributing to the strong seller\u2019s market. Data from the U.S. Census Bureau indicates that new home construction is increasing<\/a> at a modest rate.<\/p>\n

According to a January 2020 press release, the Fannie Mae Economic and Strategic Research Group (ESR) expects \u201cconsumer demand to re-establish housing construction as a significant contributor to economic growth\u201d in 2020<\/a>. The ESR Group noted that \u201cHomebuilders have begun to accelerate the pace of single-family construction, including in the much-needed affordable space, but supply constraints still exist,\u201d but reported that low mortgage rates, a strong labor market, and general heightened home builder optimism would help boost new construction<\/a> rates in 2020.<\/p>\n

Older homeowners are staying put longer<\/h3>\n

Freddie Mac found that seniors born<\/a> after 1931 are remaining in their homes longer and \u201caging in place.\u201d This is in contrast to past trends of older people downsizing to smaller homes as they get older. With better health and easier access to \u2014 well, almost everything via the internet \u2014 people aged 65 and up have less motivation and fewer reasons to sell their homes.<\/p>\n

Add to this the rising demand among millennials for entry-level housing and the low inventory problem is even more pronounced. The Freddie Mac report estimated that this trend accounted for 1,095,821 houses held back from the market in 2018<\/a> and a total of 1.6 million homes not put up for sale through 2018. This number is derived from estimates of how previous generations have behaved in regard to homeownership. In other words, during their homeownership tenure, people born between 1931 and 1959, did not put up for sale <\/a>a cumulative 1.6 million homes. Those 1.6 million houses in turn represent a year\u2019s typical new construction supply.<\/p>\n

\"A<\/a>
Source: (William Iven \/ Unsplash)<\/figcaption><\/figure>\n

The economy and interest rates<\/h2>\n

Interest rates are expected to remain low throughout 2020 and rise in 2021. As of February 2020, rates fell for the third week in a row to 3.45% for a 30-year fixed-rate mortgage. Weekly updated statistics can be found<\/a> on the Freddie Mac website.<\/p>\n

A 69% majority of economists attending the National Association of Realtors 2020 Real Estate Forecast Summit predicted no change<\/a> in the federal funds rate for 2020, meaning mortgage rates are more likely to remain steady. We definitely saw some fluctuation as the economy stalled during measures to stop the spread of COVID-19.<\/p>\n

\u201cWhile interest rates are expected to remain below 4% in 2020,\u201d said Daniela Andreevska, an economist at Mashvisor, a real estate data analytics company<\/a>, \u201cit\u2019s still too early to say what will happen in 2021.\u201d<\/p>\n

The housing market itself has started cooling down<\/a>, Andreevska continues, \u201cBut a full transition to a buyer’s market is not expected to be completed in 2020. Thus, it might be better to wait until 2021 when the market is expected to cool down further.\u201d<\/p>\n

The labor market<\/h3>\n

The U.S. Bureau of Labor Statistics (BLS) reported little change<\/a> in the unemployment rate (3.6%) in January 2020. Construction, health care, transportation, and warehousing industries showed significant employment rises \u2014 and that rise in construction employment could indicate an increase in new homes, too.<\/p>\n

This all changed in March 2020, when unemployment spiked, and experts think we can expect to see the rate climb post-coronavirus lockdown. This could be good or bad for you as a buyer.<\/p>\n

How stable are your own job prospects? Are you in an industry that has seen mass layoffs recently? Do you foresee advancement opportunities in your field of expertise?<\/p>\n

It\u2019s important to note, too, that most of this data does not include the millions of workers who fall into the \u201cgig economy\u201d \u2014 Lyft and Uber drivers, freelance writers, consultants, and other independent contractors. In fact, there isn\u2019t a lot of data available<\/a> when it comes to actually counting these types of workers and figuring out how much money they do and don\u2019t make.<\/p>\n

\"\"<\/a>
Source: (Alexander Schimmeck \/ Unsplash)<\/figcaption><\/figure>\n

Personal finances<\/h3>\n

Perhaps the most significant thing to consider<\/a> when whether or not you should buy a house in 2020 or wait until 2021 is what kind of savings and reserve accounts<\/a> you have and what your current housing configuration looks like \u2014 is it the right time for that to change?<\/p>\n

Andreevska advises saving up a minimum down payment of 20%. \u201cHaving a minimum down payment of 20% will allow you to negotiate better loan terms in addition to lower your monthly payments, lowering the risk of a foreclosure.\u201d That said, there are plenty of reasons to get your foot in the homeownership door before you\u2019ve saved up a full 20%, so talk to a trusted financial advisor about your options.<\/p>\n

A minimum down payment of 20% will also help protect you from changing loan standards in case of lender overlays<\/a>.<\/p>\n

Something else to keep in mind when sifting through data and analysis is that most things operate and change in cycles. \u201cThere are so many factors no one has control over,\u201d notes Cleffi. \u201cI do think things will change at the end of 2020, but I think it will change because it\u2019s time for change in our current cycle.\u201d<\/p>\n

Ultimately, the decision to buy a house now or wait until 2021 is a personal one. Nothing is ever set in stone when it comes to the economy and labor markets. The best you can do is to make sure that you have your own financial world in order.<\/p>\n

Header Image Source: (Alexander Schimmeck \/ Unsplash)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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