With mortgage rates on long-term fixed-rate mortgages finally slipping into the 3% range, mind you just barely, more fence-sitters may be pondering if they should finally buy a home as opposed to rent.
Heck, homeownership is starting to look pretty darn attractive with those ultra-low monthly mortgage payments, especially coupled with depressed home prices.
But from a broader economic standpoint, not so much.
The Economy Is Ugly
Things still look bleak, with unemployment expected to remain high for the foreseeable future, and fears of a complete economic collapse still swirling.
An economic outlook released this week by mortgage financier Freddie Mac perhaps said it best:
“With monetary policy expected to keep interest rates low for a while, affordability will remain high for potential homebuyers. In the meantime, many will choose to rent.”
Huh? Affordability will remain high, but many will choose to rent? How does that make sense?
And why are they choosing? If they have a choice, how could they not possibly buy a home right now?
Current Homeowners Banking on Prospective Buyers
If they’re choosing not to buy a home, what about those who currently own a home worth half the balance of their mortgage?
Pretty scary notion that prospective homeowners who could enter the market in positions significantly better than existing homeowners aren’t willing to.
But the way they see it, it’s scarier to take the plunge and join them, given the economic uncertainty in the air.
After all, it doesn’t make a whole lot of sense to start a family and form a household when you’re not sure if you’ll keep earning what you’re earning, let alone keep your job.
And so that may explain why the low interest rates aren’t causing many to bite, at least not home buyers.
Refinance Share Nearing 80 Percent
Meanwhile, the refinance share of loan applications is in fact rising, and is now near 80 percent, per the Mortgage Bankers Association.
Previous estimates saw the purchase-money mortgage share rising to 50 percent by now…not even close. Just wait until the traditionally slow fall and winter home buying seasons.
On top of those not willing to take the plunge, there are plenty of people out there who can’t even buy a home if they wanted to, thanks to that unemployment issue, along with more stringent mortgage underwriting guidelines in place today.
And roughly 20 percent can’t buy simply because they fudged up their previous mortgage.
Imagine if the loose underwriting that was in place during the boom was still in place…everyone would own a home. But we know that’s a bad idea…
All that said, you’ve got to figure that buying a home right now can’t be all bad. As mentioned earlier, you’d be much better off than those who bought five years ago from a home price, equity and interest rate perspective.
The question is whether you need to hurry up and make the decision. Given the relatively high chance of more bad economic news, along with forecasts of lower home prices in the near future, it may pay to wait and buy next year if you’ve got time.
After all, you may find a lower home price and a similar mortgage rate in six months.
And in the meantime, you can get your finances in order to ensure you will qualify without worry when that right time comes.
Read more: Tips for first-time home buyers.