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Mortgage rates have been remarkably low since the summer, and for that reason alone, many prospective buyers have clamored to purchase homes. They’re being tripped up, however, by soaring prices.
Home prices increased 5.9% nationally in August 2020, according to the CoreLogic Home Price Index, compared to a year prior. We have limited inventory to thank for that. The supply of available homes in August decreased by 17% from the previous year, leading to an uptick in demand and creating a housing market loaded with bidding wars as eager buyers compete to win contracts on the limited inventory.
The result? Many buyers are struggling to find homes, so they may not get to take advantage of the phenomenally low mortgage rates.
Is it worth it to buy a home today?
Locking in a mortgage at a low rate could result in a world of savings — but that assumes you don’t grossly overpay for a home. While home prices climbed 5.9% in August on average, in some parts of the country, there’s an even higher level of inflation in play. So what you save on mortgage interest by snagging a low rate, you’ll pay for with a higher purchase price.
That said, depending on your local housing market, there may, in fact, be some deals. If you find a home with a listing price that’s only slightly elevated, it could be worth it to buy.
Imagine you’re looking at paying an extra $5,000 for a home now (compared to what prices looked like last year). That additional $5,000 only adds $21 a month in principal and interest on your mortgage payment if you snag a 30-year fixed loan at 3%. And given that the 30-year mortgage has been trending even lower than that, it could be