1. Home prices are still off their highs
Yes, home prices are rising from the lows seen during the housing crash of 2008, but they’re still nearly 20 percent off their mid-2006 peak. According to the S&P/Case-Shiller Home Price Index, average U.S. home prices are currently at summer 2004 levels. In markets that are still recovering, first-time homebuyers could see significant appreciation over the next few years, if they buy now.
2. Interest rates are expected to keep rising
Interest rates are slowly climbing, and as the Federal Reserve concludes its economic stimulus plan, rates are expected to continue to rise. Some experts believe mortgage interest rates could hit 5 percent by the end of 2014 or the first quarter of 2015, according to Glink. And even a small bump in interest rates can mean a significant jump in your monthly note.
“If you’re offered a 4.2 percent interest rate on a $400,000 mortgage, for example, your monthly payment will be $1,961, and you’ll pay more than $300,000 in interest over the loan’s 30-year term,” Glink says. “If your interest rate were 4.9 percent, your monthly payment would jump to $2,115, and the total interest paid over the life of the loan would exceed $360,000.”
3. Rental rates are rising
There is always an argument to be made regarding whether to buy or rent. It’s all a matter of your particular situation – as well as the status of your local housing market. If you need to be mobile — prepared for job transfers or out-of-state promotions — or are continuing to search for “the perfect place,” renting is probably right for you.
However, if you would like to put down some roots, and rents are high in your hometown – it might be cheaper to buy.