Getting on the property ladder is an aspiration for many people. Owning a place of your own means you can stop paying rent to landlords and finally start building wealth.
Unfortunately, many people put off buying homes for years. Individuals, couples, and families often wait years before making a downpayment on a property.
This post cautions against this strategy. While waiting frees you up in the present, it can cost you in the long term. Compared to buying, renting is often money down the drain.
Here are some of the reasons first-time buyers should buy now:
The Job Market Is Strong
The U.S. is currently enjoying an era of unprecedented job growth. The unemployment rate is low, and work is available for everyone who wants it.
This fact is fantastic news for anyone wanting to buy a property. It means salaries are higher than five years ago, and lenders feel more confident providing long-term loans.
The news is even better if you are a professional. Tradespeople, corporate managers, packers, removalists, and healthcare professionals are all in a strong position to apply for mortgages.
Avoid Rising Rent Prices
Another reason to buy now is that average rentals are rising substantially in U.S. cities. New York, Boston, San Francisco, and Seattle are all seeing tenants paying more every month. Waiting could mean more of your income goes toward paying housing costs with less left over for savings and down payments
Fortunately, you can break this cycle by buying a property now. While mortgages can rise, they are unlikely to do so indefinitely. By contrast, rental prices rise in line with house price appreciation, driven by underlying inflation. That means you’ll always be paying more next year, all things held equal.
Interest Rates Are Falling
Another reason to buy now is that interest rates are falling. That’s because the Federal Reserve and other central banks are getting a handle on inflation, bringing it down to the standard 2 percent range, leading to lower mortgage costs and soaring approvals.
The National Association of Realtors expects mortgage rates will average 7.5% in the first quarter of 2024, falling to 6.9% in the second quarter. With inflation back to normal levels, rates could continue falling to the 4% mark seen in 2019 and 2020. Therefore, now is an excellent time to lock in a favorable rate and benefit for years to come.
Build Equity
Building equity is another reason to buy a house now. Once you acquire a property, you start paying into it from the first month as you repay your mortgage. Over time, you can build a substantial nest egg in your home, giving you more financial freedom.
In addition, house prices have the nice habit of rising over time. These increases add to your equity further, increasing your net worth and giving you more freedom. As an example, the average appreciation in the U.S. was 5% between 2016 and 2021, which beats opening a savings account.
Rented properties also appreciate over time. However, these increases only benefit your landlord!
Establish Stability
Lastly, owning a home gives you a sense of stability and control. You’re no longer subject to the whims of a landlord or the rental market.
Because of this, becoming a homeowner may benefit your health. Researchers recently found that people living in rented accommodation have a lower life expectancy than those who own. Scientists postulated this was because long-term tenants experience chronic stress, damaging their bodies and leading to the early onset of chronic disease.
Even if you don’t feel your health is suffering, there are other substantial benefits to making the switch to owning. First, it lets you avoid rent increases, making budgeting for future years more manageable. You always know what your monthly payments will be on a fixed-rate mortgage deal, letting you allocate spending relative to your income.
Second, you can live more freely when you own a home compared to renting accommodation. Renters don’t have much flexibility when it comes to adjusting the décor in their living spaces, but as a homeowner, you do. If you don’t like the kitchen or bathroom, you can rip it out and start again.
Finally, buying a home gives you peace of mind. You gain a sense of stability because you have more control over your housing situation. You are no longer dependent on shady landlords who fail to do essential repairs or force you to move out earlier than you’d like. Owning a home makes you feel more in control of your life, giving you a sense of financial and emotional stability that renting can’t.
