If you can afford to buy a house now, you should. Real estate continues to be an attractive asset to purchase even in cold weather months thanks to declining mortgage rates. According to Freddie Mac, 30-year fixed mortgage rates fell to 3.51% in late January 2020, down nearly a percentage point from last year and dropping to its second-lowest level in three years.
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This is good news for both buyers and sellers because lower rates mean increased purchasing power. Right now, potential homebuyers can likely afford a more expensive home than they previously thought. On top of that, more borrowers can qualify for loans. The concept of supply and demand makes this profitable for sellers as well. Mortgage applications have increased recently as homebuyers look to get ahead of the game before the busy spring season.
These historically low rates have emerged at an optimal time in the housing market. Homes are in high demand, and with with the limited supply of listings, inventory buyers need all the buying power they can get. The persistent low inventory has caused homebuilding to increase across the nation to a 13-year high in December 2019, up 16.9% since November. This will help to alleviate the inventory crunch, but is unlikely to create a surplus anytime soon.
Specifically, the need for entry-level and midlevel priced homes is increasing as more millennials seek to become first-time homebuyers. According to Moneywise.com, construction on single-family housing accounted for 1.1. million homes in December 2019. To put this into perspective, the last time single-family housing construction reached over 1 million units was in December 2006 before the housing crisis. This is great for sellers who have homes priced below $250,000, because newer buyers are yearning to commit to affordable housing.
Although spring has typically been the busiest buying season, February and March are looking to be prime months to buy or sell a home. If you are a potential homebuyer, it’s important to remember that rates can rise and fall at a moment’s notice. Don’t hesitate to lock in a rate that works for you and become one step closer to home ownership.