What You Need to Know to Buy a Home in Southern California in the Next 5 Years

Buying home

On average, most people buy a new home every 5 to 7 years. With so many changes to the real estate market and mortgage laws, it is helpful to start preparing for a purchase long before it’s time to actually do so. Good planning will help you save money and make better investment decisions. Here’s what you need to know to buy a home in Southern California in the next 5 years.

Interest Rates are on the Rise

For several years, the interest rates remained low. It was understandable given the housing market crisis and other things going on in the economy. However, the market has since bounced back! The economy has improved overall as well. There is no reason for the Fed to keep rates locked or low. In fact, they’re already increased the rate this year. They are likely to continue doing so. We can expect rates to rise even more over the next few years.

Although Fed rates do not directly impact mortgage interest rates, there is an indirect correlation. As rates rise, so does the cost of owning a home. Therefore, you are unlikely to afford the same priced home in the future as you do now. This may be worth considering buying now versus later.

Home Prices Will Eventually Decrease

Over time, as mortgage interest rates rise, home prices will eventually fall. However, it could take years for home prices to react to dramatic changes in interest rates. The two changes will somewhat offset one another, but that’s assuming there aren’t other contributing factors.

The market is extremely hot right now in Southern California because demand in high but inventory is low. That difference between supply and demand is what’s driving up home prices to begin with. As interest rates rise, it will be interesting to see how inventory and demand will change as well. As long as demand is high, it’s unlikely that home prices will fall, despite any increase in rates.

Preparing for a Future Home Purchase

So, here’s what you need to know to buy a home in Southern California in the next 5 years.

  1. Start paying attention to market prices and interest rates now. Seeing the patterns can help you select the opportune time to buy.
  2. Work on improving your credit. High credit scores will allow you to qualify for lower interest rates and better mortgage programs.
  3. Start saving. Even if you don’t need all the funds saved for your down payment and closing costs, good savings can make it easier to obtain mortgage approval.
  4. Identify desirable neighborhoods. Being unsure about neighborhoods can waste valuable time in the home buying process. Plus, real estate is about location.Prices can vary greatly from one community to another. In order to properly monitor the market, you really need to have a location in mind.
  5. Understand your options. It’s a good time to get educated about mortgage programs, requirements, etc. This way, you’ll know what to aim for and how to best accomplish your homeownership goals.

More on What You Need to Know to Buy a Home in Southern California

As you get closer to buying a home, it will be critical to work with the right professionals. From real estate agents to attorneys and contractors, industry professionals offer valuable information and guidance. There is so much to know when it comes to buying and selling a home. Why not rely on experts who have experience from hundreds of home sales? Being informed and prepared is the best way to make smart investment decisions when it comes to buying a home in Southern California.