5 reasons to buy a house in the next 5 months

Numerous factors make homebuying advantageous for the rest of this year.

By MSN Real Estate partner Jul 18, 2014 9:25AM

© Phillip Spears/Getty ImagesBy Hal Bundrick, MainStreet

 

A combination of market factors may make you think you're getting priced out of the home market. But one observer believes first-time homebuyers might want to consider making a move.

 

"I know it's hard to face rising interest rates and rising home prices at the same time," says Ilyce Glink, real estate expert and managing editor of the Equifax finance blog. "The good news is there's still plenty of runway if you want to buy a house this year."

 

Glink believes first-time homebuyers should consider these five good reasons to buy a house before the end of the year.

 

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1. Home prices are still off their highs

Yes, home prices are rising from the lows seen during the housing crash of 2008, but they're still nearly 20 percent off their mid-2006 peak. According to the S&P/Case-Shiller Home Price Index, average U.S. home prices are currently at summer 2004 levels. In markets that are still recovering, first-time homebuyers could see significant appreciation over the next few years, if they buy now.

2. Interest rates are expected to keep rising

Interest rates are slowly climbing, and as the Federal Reserve concludes its economic stimulus plan, rates are expected to continue to rise. Some experts believe mortgage interest rates could hit 5 percent by the end of 2014 or the first quarter of 2015, according to Glink. And even a small bump in interest rates can mean a significant jump in your monthly note.

 

"If you're offered a 4.2 percent interest rate on a $400,000 mortgage, for example, your monthly payment will be $1,961, and you'll pay more than $300,000 in interest over the loan's 30-year term," Glink says. "If your interest rate were 4.9 percent, your monthly payment would jump to $2,115, and the total interest paid over the life of the loan would exceed $360,000."

3. Rental rates are rising

There is always an argument to be made regarding whether to buy or rent. It's all a matter of your particular situation – as well as the status of your local housing market. If you need to be mobile -- prepared for job transfers or out-of-state promotions -- or are continuing to search for "the perfect place," renting is probably right for you.

 

However, if you would like to put down some roots, and rents are high in your hometown – it might be cheaper to buy.

 

"Divide the list price of the home you're interested in by the annual rental rate of a comparable property to determine the price-rent ratio," Glink advises. "If it's below 20, chances are it's a good time to buy."

Of course, buying a home means more than a mortgage. Remember to consider the other built-in expenses: maintenance, insurance, taxes and utilities.

 

4. Buying power

Americans have been steadily reducing their debt load. Maybe you have, too. The lower your debt, the higher your buying power. Creditors will consider your debt-to-income ratio – how much debt you have, compared to your gross (before-tax) income.

 

"Experts generally agree that you can spend between 28 percent and 36 percent of your gross income in total debt service -- that's your housing expenses plus your other debt payments," says Glink.

 

5. With lower debt comes a higher score

As you pay off student loans, credit cards and consumer debt, your credit score will improve. And that's one of the biggest factors mortgage lenders consider when determining the interest rate and terms of your loan.

 

"You should definitely consider buying this year, because it's unlikely the housing market will look much rosier next year, when interest rates and home prices could be even higher," Glink says.

 

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46Comments
Jul 23, 2014 10:36AM
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you cant buy ahouse if you have no money jerk
Jul 23, 2014 10:33AM
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I don't have money to buy a home it sucks I want a house
Jul 23, 2014 8:22AM
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Might be a good idea to wait and see what the effects are from all the money printing to the economy. The Fed and Federal gov. have added about 10 trillion to the money supply in the last 5 years. We are on a road we've never been down before. But if you feel your income is secure and the cost to own is less than the cost to rent it might be a good idea to buy. In LA we have an inverted housing market, it's cheaper to rent than it is to own. this is not good. To live in cal comfortably you need to be the 1% or a dependent of the government.
Jul 23, 2014 8:12AM
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I want to buy a house, but cannot get a loan.  The Banks/Government are way too tight.
Jul 23, 2014 7:14AM
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5 reasons not to buy now. #5 Unstable job market. #4 unstable stock market. #3 unstable government  #2 unstable housing market. #1. Because MSN says its the right time to buy.  How often do we hear this?.  Maybe next week it will tell us the five reasons not to buy now.   
Jul 19, 2014 1:10AM
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Can I print money and cops not giving me trouble?
Jul 18, 2014 4:54PM
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go-figure-got new-$890 a month x16yrs [ 12 payments per year ]+balance $89.000.for house. what retirement pay. The only dream is a night mare. unless your the 1 in the bmw who just scammed you in to buying a house on land that aint theirs [ was robbed from the native Americans/which we call our self's Americans ].great tip don't buy.thks 2012
Jul 18, 2014 4:02PM
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Good luck to all. Kids today are told to save 25% of their earning for retirement. Go figure! Cost of living is to high to save. Then outsourcing jobs. Wipshooding people into taking lower paying job. The whole thing is BS
Jul 18, 2014 3:03PM
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The real estate industry has been giving us this same message no matter what cycle the economy might be in at the time. 
Therefore,  it's just the boy crying Wolf some more.
Is it a good time to buy?  Maybe.  Same answer that could have honestly been given at any point along the graph before we knew the future.


Jul 18, 2014 2:31PM
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My next home purchase will be a cash deal.  Higher interest rates = lower home prices.
Jul 18, 2014 1:27PM
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Shameless PR piece turned into a "news" article by the NAR.  Nice.
Jul 18, 2014 12:59PM
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this economy is like a house of cards.
Jul 18, 2014 12:51PM
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Like they say there is a SUCKER born everyday, if you truly own a home can't you do what ever you want with it?, and why is it that even after you supposedly own it do you have to pay taxes on it every year?, people seem to be brain washed now days by that BS The American Dream, I guess that's why called the American Dream ..... LOL
Jul 18, 2014 12:48PM
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If you're priced out just rent a small place and save. 
Jul 18, 2014 12:48PM
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Housing is still a big RP-OFF, and these loans only add to the RIP-OFF. 
Jul 18, 2014 12:20PM
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Interest rates will go up from here, buy now.
Jul 18, 2014 12:14PM
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My home value has doubled, since 2012.
Jul 18, 2014 11:14AM
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What's gone is lending to people who DON'T have a lot of money.
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