by Dan Christian in Blog.
Buying a home is generally the largest investment a person will make in their lifetime, and knowing when to buy can help ease any potential financial strain. When searching Westchester, CA homes for sale your realtor should explain that there are several key factors that point to why buying a home before 2014 is advantageous for a number of reasons. We have all heard the expression “time if of the essence”, and in the case of buying a home there are indicators surrounding interest rates, home sales and affordability that give real sustenance to this old saying.
Rising Interest Rates
Mortgage rates are at a historically low point, and this means they have nowhere to go but up. Federal Reserve Board chairman Ben Bernanke announced last June that a program was being launched to buy mortgage-backed treasuries and securities from banks in order to push financial institutions to lower interest rates. What resulted immediately after the announcement was a rise in mortgage rates by half to one percent. In the past few months rates have slightly crawled back, however this program will eventually end and many have predicted 2014 as such a time. Numerous mortgage bankers are predicting that rates will rise somewhere between five to six percent after the Federal Government stops buying.
Increasing Home Prices
In addition to the rising tides of interest rates, the cost of home ownership is also creeping upward. According to the S&P/Case-Shiller 20-City Composite Home Price Index, home values across the U.S. shot up by over 12 percent. This clearly sounds the “urgency horn” to would-be homeowners that now is the time to buy before values continue to rise. When examining these trends buyers should be aware that for every rising tick mark interest rates translate 10 percent less buying power. So what does this mean for buyers in the Los Angeles housing market? According to ‘The Los Angeles Times’ buyers are getting spooked by the rise in home costs, but are encouraged to buy: “ The Los Angeles region saw home prices skyrocket this year as families and investors flooded the marketplace, looking to take advantage of historically low mortgage rates and still-cheap property. The market has cooled since the spring, in part because of declining affordability. The median home price […] was nearly 22% higher in October than the same month last year [….]”. When considering the local Los Angeles market and the national rise in interest rates and home prices, buyers can still stake their claim to homeownership and get a good deal before the calendar changes over to a new year with predicted increases on the horizon.
The national Association of Realtors (NAR) publishes its housing Affordability Index based on the relationship of three factors: median family income, average mortgage rates and median home prices. At the beginning of 2013 NAR’s index registered a composite number of 210.7. The best Los Angeles real estate agents will sit down with their clients and explain that this initially translates into time-sensitive affordability. A value of 100 signifies that the median income makes enough to qualify for a home loan on a house that has a value resting at the national median. Therefore a value of 210 means the buyer must make more than twice the income necessary to secure the home loan or lay out a 20 percent down payment. The index is predicted to climb after 2014 and this, as well as factoring in last year’s interest rates and home cost trending, buyers would be wise to buy now rather than later.