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A quarter of homeowners expect to buy a new home in the next two to five years, according to a new survey from GOBankingRates.
During the pandemic, new home seekers were able to secure mortgages at incredibly low interest rates. Add to this the growing frenzy of supply chain issues, and many felt the need to buy a home quickly, if not practically. Many homeowners are now looking to correct their buying mistakes.
If you’re entering the same market, it’s important to be realistic and prepare as much as possible.
The market is different from the previously purchased market
“Many homeowners either bought a smaller home than they thought they needed or underestimated the effort required for a fixer upper,” said Kate Howerton, MBA, CFP, financial coach. says. smartpass financial.
As a result, many homeowners wait at least two years to avoid paying capital gains taxes and relying on their current home equity to pay for their next home.
Other homeowners may have no choice. Many large cities in the United States have nothing to buy, making it difficult to find your next home. It’s also a big blow for first-time homebuyers.
“Rentors see a bleak future where wage growth and job prospects are stagnating while rents continue to rise,” said Alan Corey, author of House FIRE. [Financial Independence, Retire Early]: How to become a high-profile real estate millionaire with plenty of time and money to burn. ”
For some, instead of worrying about rents continuing to rise, it might make sense to take out a fixed mortgage instead.
Financing options are not the same
A GOBankingRates study found that 23% of those considering buying a home plan to spend less than $200,000. Real estate valuations are skyrocketing across the country. For example, from November 2020 to November 2021, Phoenix home prices increased by 32%.
“At this point, unless you want to live mostly in the countryside, you probably won’t be able to find a suitable property within this budget,” Howerton said.
About 30% of survey participants pay less than $1,000 a month on mortgages.
“These numbers only look realistic when someone wants a 40% down payment on a property,” Corey says.
Being able to purchase a home with a long-term fixed rate loan is one of the greatest benefits of being a homeowner. To take advantage of financing options, Corey suggests it makes financial sense to make as little a down payment as possible, even if private mortgage insurance is included.
Moving isn’t always a bad idea
If you don’t want to move to the countryside to own cheaper housing, consider moving to a steadily growing area. Fast-growing cities mean more jobs and more people, two factors that always drive up real estate prices.
When considering one of the fastest growing cities in the United States, don’t forget to assess the environmental risks it may contain. Corey recommends watching out for hazards such as wildfires, tropical storms, tornadoes, floods, rising temperatures and other factors that can cause migration.
It’s not impossible to buy a home in two to five years, but you need to be realistic about how much you can afford wherever you want to live. It’s important to stay up-to-date on buying trends while keeping an eye on the housing market in your area. Your next home may not be exactly what you originally planned, but the sooner you start, the sooner you can get the dream home you want.
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