Lots of people are thinking about buying a new home in 2018. You need to be aware of 5 things first before you do invest in a new home.
1) The housing trends are rising at a rate of 5-6% per year. The normal rate is about 3% per year. Is there a bubble in the housing market’s current state? Yes and no. There is a steady climb, but you should always be aware of the trends. A house that rises at about 6% now might end up being lower in two years time. The Bayrock Index is a great tool you can use.
2) You need to watch the home price movement in each city. You will find that they vary. In 2011, Portland’s main city Seattle had a high home appreciation. That same year places like Boston and New York had low appreciation values. Population and economic growth are two contributing factors with home appreciation. Places like Seattle might be having tremendous housing growth due to an economic surplus, whereas, Las Vegas might have a low economic surplus, at the same time.
You need to buy in the areas that have a greater surplus. The higher the growth in population, the more surplus a city has. More people are there to buy homes and invest in certain local areas. In places where the growth is slow, the capital is not there.
Investors will not be putting out the money for a property.
3) You might find some of the homes are out of reach. People are less willing to “trade up” when this happens. The supply and demand are begin compromised.
Chad is not making much at work. His rent has increased more so than it was two years ago. He thinks about buying a new place to save money. Chad will need to put at least his current rent down as the first payment to secure his new home. Why? The supply is down. Any home that Chad can find is going to cost more than what it might have originally. Chad is being charged more because the housing market is trying to recoup any loss they already have.
If the supply and demand were up, Chad might be able to afford the new home at a reasonable price. Chad needs to stick with his current home because it makes more economic sense.
4) Credit concerns are another issue facing consumers. After the Great Recession, more regulations were put in place at banks. People are not able to afford the homes they want because their credit is in the way. Some people do not have enough credit history. You need at least a 750 score to apply for a normal loan. Most people are in debt. They do not have the scores they need to apply. You need to consider the possibility when you go to apply. If you are sitting on a score of less than 700, you might be turned down, even for a home that is in foreclosure.
5) The Federal Reserve is tightening the reigns more than usual. Insiders are speculating that the mortgage rates will be higher next year. Information like that does not bode well for people who already have problems making their payments. Some say the increased mortgage rates will hurt the housing market and others disagree.
If you do plan to buy next year, you need to be able to afford price attached. You also need to be prepared to own the house for a few years. The housing market is not in a great place where buying and selling at a rapid pace is an option. This is not a bad time to buy, but you need to have all your ducks in a row before you do.