The state of home buying
Things are looking up for home buying. New construction and sales are up but so too are prices and mortgage interest rates. Is this still a good time to buy, and will it get better or worse? N.C. State University economist Mike Walden responds.
“I think it still is a very good time to buy. Now you did mention that mortgage interest rates — obviously most people need to take out a mortgage, which is simply a loan to buy their house — have gone up over the last couple of months, but they’re still very low based on history. I do see the likelihood for higher rates down the road. I don’t think substantially higher in the near term, but I do think the trend will be up rather than down.
“Now prices of homes are also up. This could have plus and minus implications for home buying. Obviously, a minus means that if you are a home buyer, you’re looking to buy a house. If the price is higher this year than it was last year, that means that you’re either going to have to come up with a higher down payment, or you’re going to have to take out a bigger loan. So most buyers look at that as a negative.
“But there is a plus because when people buy a house, you’re really buying an investment. You’re buying something that can change in value. Now obviously over the last couple of years for many homebuyers the investment’s not been very good because home prices have gone down on trend. But now home prices are going up.
“So, that is sort of a counter — if you will — to the higher financing costs. If you know that you’re buying that house and next year and the year after it’s going to be worth more so that when you sell it you’re going to get more, that’s actually a big plus for people. So I think all taken together, when people consider all these things, I still think that homebuying is looking much more attractive than it has been in the recent past.”Category: Economic Perspective