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February 2, 20235 Reasons to Buy a Home in 2021
Should you buy a house now or wait until 2022? We’re going to tell you the 5 benefits of buying a home in 2021 and reasons why you might regret waiting.
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1. Financial, Emotional and Personal Security
3. Tax Advantages of Owning a Home
5. Home Values Continue to Appreciate
Why is it so hard to buy a house 2021?
What will real estate look like in 2022?
Should I buy a house now or wait until 2022?
Will house prices go up in the next 10 years?
Why is buying a house so stressful?
Buying a house is a waste of money?
The controversial unknown is having any first time homebuyer, investors, and families looking to upsize or downsize scratching their head. Is now a good time to buy house, or is waiting going to put you in a better position with low mortgage rates and possibly lower house prices? Don’t be so sure to expect a drop in the market anytime soon. It’s understandable to be concerned about where the market is headed and be hesitant to make a move. But the old saying does ring true – don’t wait to buy real estate. Buy real estate and wait.
These are five major reasons why to buy a house sooner rather than later.
Advantages of Buying a Home
1. Financial, Emotional and Personal Security
The most significant benefit to owning your home is the security that comes with it. You’ll never have to worry about an eviction notice and have the peace of mind that you can make the house a home. Want to knock down a wall to create a more open concept kitchen? The choice is yours. Your hard-earned money will turn into equity with every home update. However, if you’re looking to turn your rental into your own private oasis, every update you make will have to be run by the landlord and likely on your dime. When you have to move, you can’t earn back the time and money you put into any renovations.
According to NAR (the National Association of Realtors), 44% of homebuyers were motivated to buy a new home to “avoid renovations or problems with the plumbing or electricity.” If you’re one of those people that don’t want the headache that comes with updating your home to meet your current needs, it’s time to buy a house.
If you’re looking for reasons to buy a bigger house, you can count on selling your current one for top dollar.
2. Renting vs Buying a House
There’s a long list of reasons to buy a house rather than rent but the best of all – pride of ownership.
Reasons to move into your own home can range from freedom to decor details and having peace of mind knowing you won’t have the landlord coming for an inspection anytime soon. If you’re staying away from buying a home because you’re worried that you won’t be able to afford the mansion of your dreams, buying a home with less square footage may be in your best interests. In fact, there are no reasons why not to buy a small house. Even if you don’t plan to live in it yourself, it will appreciate over time with tenants that will cover the mortgage while you enjoy your current rental.
Unlike your rent, fixed-rate mortgage payments don’t fluctuate or rise over the years. This means your costs could even decline the longer you own your home! The only thing that will increase is property taxes and insurance costs.
3. Tax Advantages of Owning a Home
The U.S. Tax Code allows you to deduct any interest you pay on your mortgage, your property taxes and some of the costs involved in buying a home. Not only this, but purchasing a home is investing in your savings or retirement plan by building equity. Generally, you can take up to $250,000 ($500,000 for a married couple) as your gain when you sell without owing any federal income tax.
Buying a home in 2021 also has a major advantage for investors – the 1031 exchange is still in play- for now. The Biden administration has publicly expressed their possible revamp of the 1921 tax code to limit the deferment of payment. While we can’t predict what’s going to happen, knowing that it’s still available is a significant bonus for investors still looking to buy in 2021.
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4. Interest Rates are Low
When you hear that interest rates are low, if you can’t put it into perspective, you may not realize the advantages of buying a house this year could bring. Right now, Wells Fargo offers a 2.625% rate on a 30 year fixed mortgage, while NerdWallet reports the national average around 2.838%. To compare what the interest rates looked like in the past, 1981 was an astonishing 18% according to The Mortgage Reports and up to 7% just twenty years ago. (Keep in mind, 20 years ago is 2001).
With low rates come a lower monthly payment on your mortgage. As mentioned, any interest paid can be deducted at tax time, which can be motivation enough.
5. Home Values Continue to Appreciate
The true benefit to home ownership is the wealth that builds while you pay down your mortgage, often similar to rental rates in the area. Over time, home values continued to rise and even were up 10% at the end of last year. But will that craze only last throughout the pandemic? Not necessarily. While prices may not jump 10% year over year, NAR predicts a 3% rise for the rest of 2021. Historically speaking, single-family resale home prices have increased on average 5.2% each year from 1972 through 2014.
Frequently Asked Questions
When to buy a house?
The decision to buy a house in 2021 comes down to a couple of key factors. These include:
- Your financial stability
- Your credit score
- Your motivation for moving
Real estate is the wisest investment you can make – after all, you’ll need somewhere to live. As soon as you’re financially able, buying a house will set you up for a wealth-building portfolio. Even if you’re not sure about buying your forever home, one of the reasons to buy a house could be for an investment property. That way, you can build equity while you rent and be one step closer to your dream home.
You can either choose to pay rent, which is often on par with the mortgage cost.
Where should I buy a house?
Buying a house in this market can be highly competitive, especially in certain urban areas. Where you should buy a house solely depends on your motivation. Are you happy with your community and hoping to take root? The best city to buy a house in is the one you’ll be happy in, not one that is the “best bang for your buck.” However, if there’s not a community you’re in love with, here are some great things to look for when deciding to settle down or purchase an investment property that will continue to rise in value.
- Look for an “up-and-coming” neighborhood that has plans for further development.
- Find an area that has been increasing employment opportunities.
- A neighborhood with a low crime rate.
Why is it so hard to buy a house 2021?
People have wondered if it is a good time to buy a house with stories of bidding wars and soaring prices in 2021. Buying a home during the pandemic has been challenging because of the lack of inventory, with a big part of the population moving into the millennial age, where they’re ready to settle down and buy a house. Development of new homes has been behind, causing even more inventory scarcity. However, the benefits of buying a home now outweigh the competition. Prices have continued to increase year over year, with no drop in sight. What we may see is a “settling” of the market, back to its usual incremental increase rather than price hikes in popular neighborhoods. To buy house now would save you from the unknown that comes with 2022 and beyond, such as potential interest rate hikes or even further price increases.
What will real estate look like in 2022?
People are questioning whether or not 2021 is a good time to buy a house and if 2022 may hold more promise. According to the National Home Price Index, homes have generally continued to increase year over year since 2012. Without a crystal ball, there’s no clear sign of what real estate will look like in 2022. Still, historically speaking, prices will continue to increase as more businesses can thrive after the pandemic, and interest rates will hold steady at a low price.
Should I buy a house now or wait until 2022?
Buying a home in 2021 means, you’ll be buying in the known – you know what the market is like, interest rates, your financial situation and the state of the economy. Waiting until 2022 may only bring uncertainty, which leads to one of the significant reasons to buy a house in 2021. To own a house now and purchase in your desired area will set you up for security and peace of mind.
Marshall Field, an American entrepreneur and founder of Chicago-based department stores of Marshall Field and Company, said it best.
“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
Will house prices go up in the next 10 years?
One of the biggest advantages of owning a home now is the likelihood of prices going up in the next 10 years. Looking to the National Home Price Index, prices increased from roughly $137,000 in 2011 to $255,000 in 2021. Even after the great recession in 2008, we saw prices bounce back after a 10-year term.
Why is buying a house so stressful?
Buying a house now can have added stress because it’s not only a financial investment but likely an emotional one as well. It almost makes you wonder – is buying a house worth it? The emotional security that comes with homeownership far outweighs the stress of finding the right place and putting in an offer. The pressure can come from competition, buyers’ remorse, or all the things that will be added to your to-do list to turn a house into a home.
Buying a house is a waste of money?
If you’re living in a home, condo, or any sort of space that requires payment, to buy a house is not a waste of money. Owning anything that appreciates in value, such as mutual funds or owning house is beneficial for adding wealth to your portfolio and security in your place of living. You can’t control if your landlord is going to sell. Buying something that can’t grow in value, will depreciate over time or won’t add any benefits to your lifestyle is a waste of money. Buying real estate can only put you further ahead towards your goals.
The pros of buying a home in 2021 are that the search and buying processes are more streamlined than ever. Using a service like Richr, you can list your house online for free and get 2% back on any home purchase. The pride of homeownership has never been more accessible, with the opportunity to earn cash back to pay off your mortgage quicker, start the home renovations, or put it in savings for your next investment property.
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