Beginning homeownership with a “starter” home, has long been the traditional strategy for generations. Part of the logic behind starting with a smaller home; it gives you an opportunity to learn what it takes to maintain a house and helps you understand some of the unexpected costs that come along with homeownership.
A slightly longer view into the future, suggests a different strategy may be a better choice; time to Rethink the Starter Home Strategy
We have a convergence of factors at play. Long term low interest rates and rising prices. The Fed has indicated they will not raise rates anytime soon, and low inventory continues to put upward pressure on pricing with no clear end in sight.
As of March 4, 2021, the average 30-year mortgage rate according to Freddie Mac was 3.02%; up .37% from the week of January 7th. At the same time in 2020, the rate was 3.29% and in 2019, it was 4.41%. That is a difference of 28 and 139 basis points.
The principal and interest payment on a $300,000 mortgage would have been $236 higher two-years ago and $44 more one-year ago. Current low mortgage rates are saving home buyers money on their interest especially when you factor in the average time people stay in their home is approximately ten years.
Even though prices have increased over the last two years, some home buyers may be able to afford more now with the lower rates, which says we may need to Rethink the Starter Home Strategy. See our recent article “Home Buyer” with more great info about home buying strategies
Consider this alternative strategy: Anticipating future wants and needs now may present some opportunities for you to lock on today’s low rates and prices. Example, just married but no kids today? What about 2 years from now you might have two kids and need 2 more bedrooms! Or, perhaps your parents are getting along great, but aging. Maybe having a guest house available makes sense. Buying a larger home today may make sense in a lot of different ways – not the least of which, it gives you room to grow without the expenses of selling and moving.
Each time you sell and buy a home, there are expenses associated with it and these expenses lower the value of your equity.
This could be a great opportunity for you to Rethink the Starter Home Strategy, you can buy the home now that will meet your needs in the near future, while locking in low interest rates, lower prices and eliminating the cost of selling and buying in the transition. Want more Home Buyer Tips? Then you won’t want to miss our Home Buyer Guide for 2021. Full of important information to consider when buying a home
As compared to other large metropolitan areas in CA such as Orange County, Los Angeles or San Francisco, home prices in the Coachella Valley are affordable and the perfect place to Rethink the Starter Home Strategy. There are lot’s of great opportunities to buy a home here in the Desert.
Have a question? Send us an email, we’re happy to help.