Home Prices to Soar Over the Next 5 Years: What Does This Mean for You?
Home prices can shift tremendously over time, either increasing or decreasing. There’s no way to forecast with certainty how prices will perform year after year. Still, if you’re thinking about selling or buying a property in the near future, a loose calculation of future values can help you plan. So, it’s important to review housing trends and consider what experts say on the matter.
According to a recent Home Price Expectation Survey, “home values will appreciate by 5.0% over the course of 2017, 4.0% in 2018, 3.2% in 2019, 3.0% in 2020, and 3.0% in 2021.” This is an average annual appreciation of 3.64%. What does this mean for you?
#1: Bigger Profits When Selling
Higher home values equal more equity for current homeowners, which is always good news.
If you witnessed a decline in home equity, rising values can help you recoup lost equity. This is a major plus if you're thinking about selling your home, but currently owe more than your property’s worth. In your present situation, many buyers won't make an offer on the home. And if you were to request a short sale from your lender, you could face credit damage.
With your equity increasing over the next one to five years, you can potentially sell your home for a profit. Proceeds from the sale can help fund your retirement, or it can go toward the down payment on your next property—it’s entirely up to you.
#2: Cash Out Your Home Equity
Even if you don’t have plans to move, you might still benefit from additional equity. Owning a home has been likened to a forced savings account. Each mortgage payment puts you a step closer to owning your home outright, and each month you gain a little more equity. This coupled with rising home prices opens the door to home equity loans, home equity lines of credit and cash-out refinances. With these options, you can pull out a percentage of your equity for any purpose. Use funds for debt repayment, home improvements, business start up, etc.
Keep in mind, however, a cash-out refinance entails applying for a new mortgage to replace your existing mortgage. You’ll submit a new home loan application and we’ll evaluate your income and credit to determine eligibility. Refinancing also involves closing costs, and it can take a couple of years to recoup these fees.
The loan experts at Cherry Creek Mortgage can help you decide the best way to access your home equity.
#3. Buy Now Before It’s Too Late
But while soaring home values is excellent news for existing homeowners, it's not the most exciting news for soon-to-be homeowners. The more home values increase, the more it'll cost for buyers to purchase their first property.
They’ll deal with higher down payment minimums and higher closing costs. And if mortgage interest rates rise with home values, housing costs can grow beyond affordability. This can limit their home choices, or force them to search for homes outside their desired neighborhoods. Therefore, the sooner they buy a home, the better.
Some people put off homeownership because they feel they're not ready. Do you feel this way? After speaking with one of our experienced mortgage bankers, you may realize that getting a mortgage is easier than you think. We offer a variety of home loans and niche mortgage products to accommodate first-time homebuyers, such as programs requiring low down payments.
Rising home prices can put the brakes on your ownership plans, or help you move up and afford your next property sooner. Whether you’re looking to buy your first property or buy your next property, Cherry Creek Mortgage can help you find the right loan program. Contact us today for details.