With rising interest rates and prices expected in 2015, there’s no better time than now…
Here are five fantastic reasons to consider buying a home before the end of 2014:
1. The end of the year means a slowdown in housing market activity. If you want to get the best selection of homes on the market, don't delay in starting your home search. In this market, some sellers may retract from listing their homes, which may cause inventory levels to drop even further. Homes in good condition don't stay on the market long, and with the current pace of buying activity, more foot traffic translates into more competition. The inventory of homes on the market in Peoria County dropped 10.3 percent in September from a year ago. The average number of days on market in September for Peoria County stood at 80 days, while Tazewell County reported 62 days.
2. Interest rates are rising. While 30-year mortgage rates are currently hovering near yearly lows, don't expect those conditions to last forever. Freddie Mac reported in its October U.S. Economic and Housing Outlook that 30-year fixed mortgage rates should continue to rise gradually, increasing to nearly 5.1 percent by the fourth quarter of 2015. Increases in interest rates only lead to higher monthly mortgage payments for you. Higher rates can also impact housing affordability in the long term. It is projected the Federal Reserve may look at rising interest rates sooner than initially forecast, but it will hinge on the labor market.
Below is a recent national housing forecast as presented by Dr. Lawrence Yun, chief economist for the National Association of REALTORS. Dr. Yun predicts 30-year fixed mortgage interest rates to average 4.4 percent by year-end 2014 and 5.4 percent in 2015.
3. Prices are rising. According to the University of Illinois Regional Economics Applications Laboratory, the median home sale price forecast indicates moderate annual increases for the State of Illinois. In addition, the Joint Center for Housing Studies of Harvard University indicates the cost of homeownership is on the rise. Delaying your purchase means the chances increase that you will pay a higher price for your home.
4. Invest in your future. Start to build equity now in your future in real estate. There's a reason homeownership is called the “American dream.” Home is where we make memories, build our futures, and feel comfortable and secure. Homeownership also strengthens communities.
According to the most recent data from the Federal Reserve Board, a homeowner's net worth is 36 times that of a renter's. In addition, the median homeowner had nearly $200,000 in net worth, compared to just over $5,000 for the median renter. The Federal Reserve's Survey of Consumer Finances is conducted once every three years. The most recent survey results were issued in September 2014.
Below is a cost comparison for a renter and a homeowner over a seven-year period from the National Association of REALTORS. The renter starts out paying $800 per month with annual increases of five percent. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After six years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after three years.
5. Start taking advantage of the mortgage interest deduction. Discover the tax write-off benefits of owning. The ability to deduct the interest paid on a mortgage can mean significant savings at tax time. The mortgage interest deduction allows homeowners who itemize their taxes to deduct mortgage interest attributable to primary residence and second-home debt totaling $1 million and interest paid on home equity debt up to $100,000. Buying a home and closing on it before the end of the year may give you a tax deduction. In most cases, loan discount points and origination fees are tax-deductible to the buyer. Check with your tax advisor to find out specifics regarding what you may be eligible for in terms of your tax deduction this year. iBi
Phil Harvey is president of the Peoria Area Association of REALTORS. Reprinted courtesy of succeedwithmore.com/morenow.