Could This Be a Good Time to Buy a Home?
In some respects, the housing market is looking brighter than it did a few years ago, particularly when you consider the various reports out there on the amount of mortgages approved. Does this mean that the housing crisis is over? Well, not quite. But it is good news for many people, and if you’ve been thinking of getting onto the property ladder this might be a good time to do so.
An over-reliance on debt?
It is noteworthy that the total amount of mortgage debt represents a little less than 8 percent of the overall personal debt. The remainder is for the most part unsecured debt, which has risen much more significantly than have a mortgage and other secured debt. Not surprisingly, the dramatic expansion in consumer credit has sparked concerns amongst some economists that people are relying too much on overdrafts, credit cards and personal loans to make ends meet.
This isn’t to suggest that any of these tools is intrinsically bad. Overdrafts are sometimes a necessary evil, and credit, if used responsibly, can improve one’s quality of life, as can loans, provided that the borrower carefully research all options before choosing a lender. But all too many people misuse these tools, and apart from any potential negative effects on the economy at large, such misuse can financially harm an individual or family, and can certainly make it difficult or impossible to qualify for a mortgage.
And the fact remains that consumer spending has driven the recovery, even though most economists would rather see all of this increased spending coming from a boost in disposable income rather than an increase in unsecured debt.
Falling house prices will be good news for some, not so good for others
In February, house prices rose by 9.7 percent over what they were in February of 2016, and are still increasing, albeit not quite so greatly (prices increased by only 0.3 percent in February). Much of the more recent increase in sales has been due to buyers of second houses, particularly buy-to-let purchasers, rushing to beat the implementation of the additional stamp duty that goes into effect at the end of March. Some experts project that in April when the additional duty goes into effect, the fervor for buying will cool markedly, bringing the price increases to a halt and, in many cases, actually reversing the trending increases.
This likely slowdown, coupled with earnings failing to keep pace with prices, could be the forerunner of a housing market collapse that might have already begun in some parts of the country, particularly in city centers.
Keeping things in perspective
Although it’s easy to get discouraged when looking at all of the facts and figures – especially if you’re struggling to get on to the property ladder yourself and can’t figure out if it’s a good time to do so – there are many reasons to be optimistic. With new government initiatives to help first-time buyers, and other incentives and benefits to help people realize their dream of homeownership, the picture does seem brighter than it was a few years ago. If you are in the market for a home, do your research and take advantage of every program and benefit available to you.
And no matter how rosy the housing market or the overall economy appears, consumers shouldn’t forget the hard-learnt lessons from the financial meltdown. It’s important that consumers do not become increasingly tempted to take on excessive debt. That’s wise counsel, whether the debt you’re considering taking on is a mortgage or simply a short-term loan for a necessary purchase. There was a time when the “common wisdom” was to buy a home that was slightly more expensive than you could comfortably afford. If that was ever wise, it most certainly isn’t any longer.
Finally, keep up with all of those facts and figures that the experts are always releasing, but take them all with a grain of salt, using the information as necessary to help keep you on the road to your own financial goals.