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What can first-time homebuyers expect as spring approaches?

February 1, 2018

Many young Americans are now eyeing the housing market and preparing to make a home purchase as the spring buying season draws near. However, some industry experts believe the market may not be as forgiving to first-time buyers as those shoppers might like, and it's something they will need to monitor closely to determine their own personal best course of action.

"Home prices and mortgage rates are already on the rise."

Indeed, home prices and mortgage rates are already on the rise, and a few months from now, when the shopping season officially kicks off around Memorial Day, they're likely to be notably higher than they are now, according to Forbes. That issue presents first-time buyers with an interesting quandary: While they may not be totally ready to get into the market today, every month they wait to pull the trigger will end up costing them potentially a lot more.

Looking at the market
Historically, home prices rise about 3 percent every year or so, but in 2017 the national number was roughly double that rate, and data suggests the trend will continue this year as well, the report said. Couple that with rates that could rise to as much as 5 percent before the end of the year - after averaging less than 4 percent for the entirety of 2017 - and it creates a situation that could leave some first-timers concerned about affordability.

"With interest rates and home prices both on the rise, first-time homebuyers - largely millennials - may want to consider making the jump from renting to owning sooner rather than later," Ralph DeFranco, global chief economist of mortgage services at Arch Capital Services Inc., told Forbes. "Overall, the shortage of housing paired with a robust job market should keep the housing market strong and growing, short of an unexpected event and despite the contrary pressures that may be created by the tax bill."

Rates are now at their highest level since 2014, and it's likely that they'll be close to 4.5 percent by spring, according to CNBC. Experts believe that could further exacerbate the issues surrounding the current inventory crunch, because higher rates may disincentivize owners from putting their homes on the market, especially if they locked in refinances when rates were hovering in the low- to mid-3 percent range.

Another issue
Meanwhile, industry veterans likewise say that young and inexperienced homebuyers typically tend to overestimate how much they can afford to spend on a home, which could further skew their difficulties in find a home that actually fits within their budgets, according to the Herkimer Times Telegram. Often, they fail to recognize the true cost of the mortgage process, and therefore may need to study a little more when it comes to what they should expect to pay.

Generally speaking it's a good idea for hopeful owners to do as much research as possible about the homebuying process. This will help them fully understand what they need to do and what to expect every step of the way. With fewer surprises, especially in an increasingly competitive market, buyers are more likely to find the homes of their dreams.

 

 

 

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