Right now is a strong time on the market to buy your first house, at least until the national interest rate starts rising from its legendary pandemic drop. It may be a sellers' market, but only because buyers are clamoring to take advantage of the current buying opportunities.
The interest rate for a 30 year mortgage is averaging now between 2.5 and 3.5 depending on the lender and circumstances. This is at a historical low, where interest rates were closer to 16% in the 80s, 10% in the 90s, 7% in the 00s, and 5% in the 2010s. We expect to see the interest rate lift back toward 4% in 2022 but right now, you stand to pay the least in interest for the mortgage itself.
Home prices are also on the rise, which creates challenges today but is great news for property values in the future. A short housing inventory (not enough homes for all the buyers) means that demand is driving home prices and construction can't keep up. A single-family home is expected to continue to rise in value over the next ten years, especially since the primary housing shortage solution will be quickly built apartments and condos.
● In neighborhoods with a steady property value increase
● In regions seeing steady high demand for homes
● Priced modestly calculating for its previous listing price times inflation since that year
Home values are a critical part of the real estate industry. Preserving and improving home values is what winds HOAs so tightly and what drives real estate investors to flip homes as the markets shift or hold on to value-skyrocketing gems. You, too, could have a home whose value increases more every year, but first, you'll want to beat the inflation rate.
The inflation rate slowly pushes up the monetary value of homes over the years. Inflation means that our money is worth less per dollar because there are so many dollars but the market value remains the same. Every year of inflation increases the home's numerical value by its assayed value times the inflation rate. Home sellers will calculate inflation along with their capital gains tax on the numerical increase of the home's value.
A brokerage account is an investment savings account best used for mid-term savings. The unique value of a brokerage account is that it has no deposit or withdrawal limitations and no tax exemptions. This leaves a brokerage account flexible to handle a portfolio of investments and make returns on your savings without limitations like retirement or income tax concerns.
Brokerage accounts are great when you are saving to buy your first house because you can continue building on your savings until you are ready to - at any time - withdraw your savings to use as a downpayment or even a cash purchase on your first house.
Saving for a house, you count every month. You may have a savings plan that stretches two to five years before you will be ready to buy, but a simple savings account has minimal returns even in that long a time. A brokerage account can provide you year-on-year returns that increase your home savings on top of the deposits you set aside for your future downpayment.
You can pull your down payment or cash purchase for the house as soon as the numbers are right and you find the ideal property. There is no early withdrawal fee as with retirement savings accounts and no need to worry about income tax complications for pulling a large sum from your savings to buy the house with.
Lastly, you gain the chance to diversify your investments. First, your home savings can go into a well-balanced portfolio to earn returns on top of your savings for the house fund. Second, the home itself becomes part of your diverse investments as you become a real estate owner in addition to a managed brokerage investment account.
Real estate is going through a boom right now as families previously stuck inside for lockdown are free to house-hunt and close on available properties. Even with a housing inventory shortage stirring buyers to a frenzy, many stock options are poised to benefit from the real estate boom. One stock we want to spotlight today is BRK.B or Berkshire Hathaway. This highly diversified public corporation is poised to benefit investors. In 2021, its measured year-on-year (YoY) reached 29.08%.
Right now is a beneficial time to invest in real estate and purchase your first family home. Contact us today for more useful investment and financial insights in the world of today.