Are you sitting on the fence about buying a home in today’s market? While you’re watching interest rates, you should be looking at other factors that could influence your decision. Here are some reasons why now is a good time to buy a new home in Raleigh, NC.
Start earning equity now.
Consumer prices keep going up. The price of homes continues to follow. The sooner you purchase a new home in the Raleigh NC area, the sooner you jump on the home equity bandwagon.
Rocket Mortgage reports that the national average for home appreciation is 2% month over month, and 14.5% year over year. How does that compare with other investments you have?
Home equity is perhaps the greatest benefit of buying a new home. It’s an investment you can live with and live IN. You don’t have to do a thing to “manage” this investment in order to keep earning equity. You can do repairs and upgrades to increase the home’s value. Of course, when you buy a new construction home, everything is brand new—from the underlying construction to all the features, materials, and systems. New homes incorporate energy efficiency and smart home automation that contribute to the value of the home (and the energy savings reduces the cost of ownership).
Whatever you choose, a new construction or a resale, now is a good time to buy a new home in Raleigh and start gaining equity in the very first year!
The competition has lessened.
Buying a new home shouldn’t be like an eBay auction. The purchase of a home is a major investment and shouldn’t be done in a frenzy just to beat out the other bidders.
When the flood of homebuyers swept the housing market, sellers had their pick of offers, often above asking price and including cash offers. Buyers who needed to finance the purchase were often skipped over. First-time homebuyers who had finally saved up a down payment also had difficulty competing against the higher offers.
That tide has receded. You’re no longer pressured to buy more quickly than you’re prepared to do. If you’re ready to buy a new home in Raleigh, NC—one of the most exciting housing markets in the country—you’ll find less competition among buyers. You don’t have to rush or stress about other people outbidding you.
Rent is rising, too.
If you’re renting, expect your monthly rent payment to rise. And who benefits from that? The landlord is getting their own mortgage paid at your expense. The home you’re renting is an investment property for them and an expense for you. You gain no equity and no tax advantage. Remember, the interest rate on renting is 100%!
First, a lesson in inflation and interest rates
Inflation and interest rates are increasing. Inflation is the rise in the price of goods (e.g., food, energy, shelter, healthcare) which is measured by the Consumer Price Index. You see it in the prices at the grocery store, your utility bills, and on your check at a restaurant.
Inflation stems from an over-supply of money circulating in the country. Those stimulus checks issued during the pandemic contributed to the excess, as well as the halting of rent and student loan payments. During the pandemic, we tried our best to deal with something we’ve never experienced, just to get through a very challenging time. Inflation was one of the outcomes.
In 2022, the U.S. has experienced the highest rate of inflation in 40 years. From September 2021 through September 2022, the CPI increased 8.2%. The energy index—no surprise here—rose 19.8%, which is lower than 23.8% the previous 12 months. And if you’ve been in a grocery store at all, you know that food has gone up, with an increased CPI of 11.2% in the past year. Groceries rose 13.0% while eating out increased 8.5%. Is it going to be more cost-effective to eat out? Your local eateries hope so!
Interest rates have been rising in order to combat this soaring inflation. It’s a fact of economics. The U.S. Federal Reserve raises rates (the cost of borrowing money) to reduce risky investments, which, in turn, helps to lower inflation. The “Feds” are tasked with reducing inflation.
Think of combating inflation like driving a car. When you’re going too fast, you hit the brakes to get the car under control. The U.S. Federal Reserve has been pumping those brakes, raising the rates six times in 2022.
Lenders and builders have financing plans to help
So, now that you know the relationship between interest rates and inflation, how can you still buy a home in Raleigh, NC, with a payment you can live with?
New Home Inc. had the same question and we’ve worked with lenders to find the best way for you to get into that home you want, need, and deserve.
The Rate Buydown is a program where the seller and/or lender pay the difference to buy down the interest rate. The reduction reduces the buyer’s monthly payments for the term of the buydown and also saves on the amount of interest paid. Each point in the buydown is equal to 1% of your total loan amount.
There are variations of this option, like a 3-2-1 or a 2-1 buydown, used on fixed rate mortgage programs.
With a 3-2-1 buydown, the first year’s rate is reduced by 3%. For example, that means that instead of 7%, you’re paying 4% for the first year of your 30-year mortgage. The second year, the fixed rate is reduced by 2 points, to 5%. The third year, you get a 1-point reduction. For years 4 through 30, you pay the full rate that was fixed at the beginning of the loan agreement (in this case, 7%).
A 2-1 buydown follows a similar pattern. You get a 2-point reduction in the interest rate for the first year of the fixed rate mortgage, followed by a 1-point reduction the second year. For years 3 through 30, you pay the full interest rate.
Another benefit of the rate buydown is that you might qualify for a higher loan amount, because your monthly payment is being reduced during the buydown period. Talk to your lender to see what you qualify for!
The other option that could work when buying a new home in Raleigh, NC, is the Adjustable Rate Mortgage (ARM). Unlike a fixed rate mortgage, the ARM’s rates vary through the term of the loan (usually 15 or 30 years). The adjustable rate is usually lower than the fixed rate, but it comes with the knowledge that it can rise. There’s a maximum amount—known as a “cap”—that your interest rate can reach over the life of the loan, so you’ll start out knowing the highest level.
New Home Inc. has worked with our lender on ARM options that give you some of the same benefit as a fixed rate mortgage. We’re offering qualified buyers a 5/1 7/1 ARM. The first number refers to the period where the rate is fixed. For example, the 7/1 ARM holds your introductory rate for the first 7 years of your loan. After this introductory period, the rate can be adjusted 1 time per year (the “1” in the name). If you’re not planning to stay in your home for more than 7 years, the 7/1 ARM is a great way to reduce your rate.
Just remember that after that introductory period, expect your rate to go up, and your monthly mortgage payment will reflect that. Be sure it’s a cost you can live with if you plan to stay in your home.
You can always refinance when the rate drops
No matter what loan program you choose, you don’t have to experience buyer’s remorse when the rates go down. Just refinance your home! Your mortgage is a long-term commitment, for as long as you plan to own your home. The rate, however, doesn’t have to be.
Don’t put your dreams on hold
When you’re ready to buy a new home in Raleigh, NC, New Home Inc. wants to help you make that dream a reality. We’re building townhomes and single-family homes for sale in Raleigh and the most sought-after Raleigh suburbs. No matter where you are in your life and lifestyle, New Home Inc. has a home to fit. We’re also working with our buyers to make the cost of ownership more affordable.
With affordability, we also mean value—lasting value. We build our Future-Proof homes with your daily needs in mind, making them healthy and smart. Smart home automation, a commitment to better indoor air quality and energy efficiency, and features that other builders consider upgrades—they’re all included in our new homes.Take a look at our communities, floor plans, and available homes for sale in Raleigh. Then contact us to find out more about making one of them your own.