One of the most positive outcomes of this challenging year of 2020, is that many families have reconsidered the meaning of “home”. The appreciation of a place equipped to fill personal needs coupled with historically-low mortgage rates, has found the demand for home purchases to have skyrocketed.
This increase in demand combined with the shortage of homes for sale at this time has caused more bidding wars, which has resulted in a rather dramatic rise in home prices. Understandably, many are cautious about buying a home at the moment.
The truth is actually this – while home prices have in fact appreciated by a startling 6.7% over the last 12 months, the cost to buy a home has actually dropped. This is largely due to mortgage interest rates falling by a full percentage point.
Consider this graph’s example of comparing a mortgage payment one year ago to the home’s appreciated value today. The savings of $87/month equates to over $1000/year.
Strange as it may seem, the economy is actually still in a recession and, that might make it the perfect time to buy a first home or upgrade to a larger one.
Per Tom Gil, Harvard-trained negotiator and real estate investor:
“When volatile assets are facing recessions, hard assets such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”
Homeowners also have 40 times the net worth of renters. Top economists remind that homeownership leads to greater wealth accumulation compared to renting. Renters neither benefit from wealth generated from home price appreciation, nor equity gains from monthly mortgage payments; equity investment naturally becomes a forced form of savings for homeowners.
In the near future, mortgage interest rates are perhaps poised to rise slightly while home prices continue to increase. These two reasons alone make buying a home at this time quite the sensible choice after all.