In 2019, Should Buyers Wait and See or Dive Right In?

Sometimes, taking a “wait and see” approach can be sensible.

If you’re waiting for a dozen cookies to come out of the oven, for example, taking a few extra minutes could make all the difference if you’re in the mood for a batch with truly crispy golden brown edges. Or if you’re waiting to make some big ticket purchase - a car, a piece of furniture - sometimes it makes more sense to give it some time and some thought, since stores are often having big promotions and discounts throughout the year.

So sometimes, playing the “waiting game” is going to be the right call. There can be no denying that. But if you’re looking to purchase a home in the coming months? Right now, the market is sending clear signals that it’s time to get moving.

If you’re a Chicago home buyer who’s on the fence about starting your home search in 2019, here are some big signs that it’s time to dive in and see what the market has to offer:

Mortgage Affordability Is a Bargain, Near All-Time Low

Generally speaking, when we talk about housing affordability, we look at a few key factors, including home costs and mortgage interest rates (more on those in a bit). But another crucial part of the affordability puzzle is to look at other economic factors that may play a role in the real estate process. The overall health of the economy, job and employment numbers, inflation and, importantly, wage growth all play a role in determining how much house a consumer can afford, at any given time.

And, recently, one of those key factors came through loud and clear - and it’s an appealing metric for buyers to note.

According to a Q4 2018 report on housing affordability from the National Association of Realtors (NAR), Americans are paying less of their overall income towards their mortgage than in previous generations, thanks to a combination of rising wages and interest rates that sit near historic lows, compared to previous years. For reference, check out this graph, courtesy of Keeping Current Matters:

 

That graph indicates that, as of late 2018, the average American homeowner spends about 17% of their monthly income towards making their mortgage payments - compared to 25% a decade ago, and an average of 21% in the 1980s and 1990s. That’s huge.

In all, this metric indicates that for the right buyers, it may actually be more advantageous to purchase a home right now than it has been for decades. And with market changes on the horizon - including a projected rise in home prices and interest rates, and turbulence in the global economy - there’s no time like the present for prospective buyers to find the right home and lock into monthly payments that will work in the long-term.

It May Cost You a Lot More to Buy Next Year

On the flip side of the “wait and see” mantra is another old saying: “perfect is the enemy of good.” Sometimes, homebuyers wait and wait, anticipating some market change that will lock things perfectly into place for them - only to find that, by waiting, they actually priced themselves out of a great opportunity in the neighborhood of their choice. We call this the “cost of waiting to buy.”

In many ways, in house hunting, it helps to get started when you have concrete data on the present moment, rather than trying to wait for an uncertain future. And right now, market conditions are prime for buyers. If you wait a year to buy, however? You could pay the price - and we do mean that literally. Interest rates and home prices are both projected to rise by 2020, which could make that dream house harder to reach if you wait a year.

For reference, check out this compelling infographic, courtesy of Keeping Current Matters:

What does that graphic tell us? In broad strokes, it suggests that the home that you currently have your eye on may cost a lot more upfront, month-to-month, and over time if you wait a year to make a move.

With home prices projected to increase 4.8% over the next 12 months, and interest rates expected to rise to nearly 5.1% by the end of the year, a buyer’s purchasing power will decrease if they put off the chance to get started, meaning that they’ll get less house, for the same payment. Or, if they opt for that same property? A buyer who purchases in early 2019 may save nearly $150 a month and almost $53,000 over the life of a 30-year loan, compared to a buyer who waits until 2020.

We’re Here to Help You Get Started

Of course, these are numbers and statistics, and they won’t necessarily tell the full story. The Chicago market is fairly singular, with ups, downs, and trends all its own. Often enough, market conditions may change from neighborhood to neighborhood, or even block to block.

And, just as importantly, every buyer’s journey is going to be unique. Your wants, your needs, your preferences, your history - all of these are going to be important to factor in, as well.

But what these snapshots do tell us is that if you’re in the market for a new home, there’s no time like the present to get started.

For one thing, the overall market is favorable to buyers, in many ways we’d be happy to discuss in depth. What’s more? Generally, we believe that it’s almost always better to buy now, when you can be sure of interest rates, home prices, and your own financial situation. While we can keep a watchful eye towards the future, no one can know for sure what may happen over the span of 12 months.

Want to get a better sense of the market in your favorite Chicago neighborhood? Curious about what it might take to get started buying a home in 2019? The Real Group Real Estate Team - Baird & Warner is here to help. Drop us a line when you’re ready to get the conversation started!

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