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Is 2022 a good year to buy a home?

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Since the federal reserve increased interest rates by .75% in July and with projections that fixed-rate loans could sit between 5 and 7% by the end of the year, many buyers are questioning whether it’s a good time to get into the market.

If you’re considering purchasing a home or an investment property, inflation, increasing interest rates, and rising home prices may give you pause.

While these changes in the housing market should encourage potential buyers to pause and consider their financial situation, buying this year might still be a good fit. For many potential buyers, purchasing a home might be a better financial decision than continuing to rent.

Benefits of buying a home in 2022

Buying a house in 2022 has some benefits to consider:

Increased prices could mean more equity

Historically, homeowners can expect the value of their property to increase over time. As property values rise, homeowners see an increase in equity. Equity is one of the key benefits of home ownership, so buying now could be profitable in the long term.

Rent is also on the rise

Renters aren’t catching a break in the housing market either. Rents are increasing nationwide. An Apartment List National Rent Report shows that rent prices rose 12.3 percent year over year. Some cities like Austin, Texas, Newark, New Jersey, and Miami, Florida, saw increases north of 30 percent.

Redfin reports that the average renter is paying $1,877 per month. If you could get a $280,000 home loan at 5%, your monthly payment would be roughly $1,503 per month… more than $300 less than the average rent payment.

A fixed-rate loan could provide stability

Renters are at the whim of their landlord regarding rental increases. Buyers who choose a fixed-rate loan can secure the same monthly payment for the life of their loan, no matter what happens in the market.

Drawbacks of buying a home in 2022

While there are many benefits to purchasing a home this year, there are some drawbacks that you should also consider.

Competition: Despite rising interest rates, there is still a lot of competition for homes. Fewer homes on the market mean your choices are limited, and you may have to pay a premium to secure the house of your dreams.

No guarantees: While property rates are likely to continue to rise, there’s never a guarantee. Many factors affect the housing market, including the United States economy, local governance, and world events. Your investment might not pay off as much as you hope it will.

Is buying a home in 2022 the right choice for me?

Buyers who are serious about purchasing a home should look at their local market. If your community is consistently growing and the economy is thriving, buying a house now has little risk. You’ll likely benefit from rising housing prices.  

However, some parts of the country have seen artificial inflation. Artificial inflation occurs when there is more demand than supply. Consumers are willing to pay more even if the property isn’t worth the sales price.

Some signs that purchasing a home might be the right decision for you in 2022 include:

  • Steady Income
  • You have a down payment saved
  • You have a good or excellent credit score
  • Your debt-to-income ratio is low.

Since interest rates are higher, you might be better off waiting if you have a low credit score or a shaky credit history. This is particularly true if you don’t have a down payment. Higher interest rates mean higher monthly payments. If you don’t qualify for a lower interest rate, your mortgage might not be as cost-effective as you want.

You may also want to consider how long you plan to live in your home. If you anticipate moving in the next 5 to 7 years, purchasing a house might not be the right choice, especially if you get a higher interest rate. It’s impossible to predict the housing market perfectly in the next several years, so you could lose money if you don’t plan to stay long.

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