You should buy your home now because historic low-interest rates will not last forever. A couple of weeks ago, one of my Facebook connections posted, “I cannot wait until the economy crashes, so I can buy a home.” I don’t often comment on a Facebook post, but I had to comment on that one because it was recency bias at play. Also, it displayed how the user completely ignores the opportunity in front of her right now.
The Facebook Comment
I don’t know much about the Facebook user who had the post. Most likely, she is a millennial in her late 30s who were old enough to remember the myriad for sale signs wherever she went between 2008 and 2012.
The median price for a U.S. home sold in 2008 was $180,100. As of this writing, according to Zillow, the median price of homes currently listed in the United States is $284, 999.
It is understandable why a potential homebuyer, who remembers the miserable housing market in 2008, would wish for another great recession. It’s a selfish thought, but you get what you can from a millennial.
The 2008 Housing Crisis
Nearly 11 million homeowners lost their homes to foreclosure during the 2007-2009 financial crisis. Even homeowners who could afford their mortgage, walk away from their home because they were deep underwater—the loan on their home was a lot more than the value of the house. Strategic default was standard in wealthy neighborhoods such as Boca Raton, FL, Galleria-Uptown area in Houston, Texas, and Summerlin North in Las Vegas, Nevada.
Why You Should Buy Your Home Now
The 2008 Housing Crisis was a black swan moment. The likelihood of it happens again is very unlikely. The housing market does go up and down, but a financial shock where housing markets across the globe drop up to 50 percent is doubtful.
The fact of the matter is, there is another black swan moment going on right now that my Facebook connection is ignoring. The 30-year fixed-rate mortgage averaged 3.75 percent during the first week of January.
Primary Mortgage Rates
- 30-year fixed-rate mortgage: 3.75%
- 15-year fixed-rate mortgage: 3.156%
- 5/1 adjustable-rate mortgage: 15
Let that above information sinks in for a moment. Someone is willing to let you borrow money for 30 years at a 3.75% rate. The current 30-year fixed-rate mortgage is just 44 basis points higher than the November 2012 historic low when the 30-year fixed-rate was at 3.31 percent. Millennial readers should stop and ask their parents and grandparents about their mortgage rates. In 1981, the 30-year fixed-rate mortgage was nearly 19 percent.
If your credit is right, down payment is ready, and your job is stable, it’s the best time to go house hunting.
