Buying a home is a big decision. For many people, it is the biggest financial decision of their whole lives.
So it is only natural that even the most committed prospective buyers may wonder out loud whether to buy now in 2019 or wait until the new year in 2020. Will the housing market be better then? Could they save more money if they wait?
If this sounds like you, you are likely both eager to buy and less eager to part with your hard-earned cash. Here are four key reasons why 2019 is a great year to take that step into homeownership!
Reason 1: Reap the Rewards from End-of-Year Tax Perks
If you are a first-time homebuyer, you likely aren’t aware that both home loans interest and property taxes are considered deductible items on annual tax filings.
In 2017, the federal government passed the Tax Cuts and Jobs Act. This Act legislated some important changes to how and how much homebuyer tax deductions and credits are disbursed.
The biggest tax perks come in the year the house is bought. If you are selling an existing residential property as well, there are also one-time seller tax perks that apply.
According to the National Association of Realtors (NAR), you will get all of these perks when you choose to buy in 2019:
- New homeowners still get to exclude capital gains made from the sale of a home.
- New homeowners can still deduct the interest paid on your property equity debt if you reinvest that amount into improvements to your new house.
- For homeowners who make solar-based upgrades, the 2019 tax incentive is 30 percent. The incentive in 2020 will only be four percent.
- New homeowners can deduct a portion of purchasing expenses in the tax year when the property was purchased.
Reason 2: Housing Prices Are Plummeting, But Not For Long
Market analysts are already predicting a housing shortage in 2020. This is great news for sellers, but awful news for buyers.
When available properties are in short supply, buyers can expect more competitions, tougher mortgage negotiations, fewer concessions, and more pressure during the buying process.
The new low when it comes to residential inventory is predicted to hit in early 2020. But right now, with home loan rates remaining attractively low and inventory in ample supply, it is still considered a buyer’s market.
Another key aspect of driving guidance to purchase in 2019 rather than waiting until 2020 is what many realtors are calling the “millennial factor.” The millennial generation is just about to turn 30, and age 30 has historically been the year that many couples’ minds turn to thoughts of property purchases.
With a glut of millennial shoppers (up to five million according to analysts) competing in a marketplace with fewer available properties, 2020 is not going to be a great year for buyers overall.
However, past trends are not always indicative of future trends. In some ways, deciding when to take the plunge into ownership is like gambling – there is such a thing as waiting too long in hopes conditions may get even better than they are today.
Sometimes, instead of holding out for the big jackpot, it is smart to step back and look at the big picture of what today’s market can offer.
Tax deductions, credits and property upgrade incentives that may disappear next year, a glut of new prospective buyers at a time when properties are becoming few and farther between, attractive mortgage rates that are predicted to increase, and other factors all make 2019 an optimal year for buying a new property.
Reason 3: The Time for Low Rate Home Loans Is Now
As a prospective property buyer, your personal credit score is probably at the very top of your mind when it comes time to apply for home loans.
But did you know your personal credit history and credit score is far from the only factors that can influence what your loan interest rate may be?
Loan rates can fluctuate based on a diverse set of ever-changing circumstances, including everything from what is going on in overseas markets to whether it happens to be a presidential election year.
These are influences far outside of any single buyer’s direct control, yet they have the potential to significantly alter the interest rates you are offered.
This is not to say it isn’t important to do everything you can to clean up your credit report, maintain a high credit score, and hold off on other big-ticket purchases in the year you plan to make a property purchase. All of these decisions can also influence the menu of loan rates you are offered!
But once again, it is also vital to take a step back and look at the bigger, broader picture of the national and global economy, including inflation, political climate, terror activity, and more.
In the same way, it is smart to take a step in and evaluate the micro-economy happening in different communities and even individual neighborhoods. Watching developer activity inside a community and in neighboring communities can be indicative of the property’s current and future value in ways that convey increased negotiating power now.
Analyst data that was recently released data indicates interest rates are continuing to decline favorably for residential property buyers. This holds true for both fixed and adjustable-rate loans.
This highlights one historical trend worth looking at more closely: fall typically tends to be a favorable time for housing buyers. If you want to sell, you are likely are trying to offload your property before year-end to reap in the tax breaks described earlier here.
In the same way, if you want to buy, you are probably trying to complete your purchase and get through the sometimes lengthy closing process before the arrival of the winter holiday season.
And while everyone is waiting to see what the new year will bring economically, financially, politically, and environmentally, high rates tend to decline and low rates tend to stay low at least until the turnover into a new year.
All of these factors are creating a type of “perfect storm” for optimal buying conditions right now in fall 2019.
Reason 4: 2020 Is a Presidential Election Year
To say the nation has been going through some growing pains over the last decade or so would be putting it mildly.
With wild swings in healthcare, climate, economy, and politics, even seasoned analysts are learning to take market trends with a grain of salt and scale back on the time frame for future predictions.
This is never more the case than when the country is in a presidential election year. And perhaps no presidential election will bring more controversy than the one upcoming, which has thus far often played out more along the lines of a reality television show than a serious political debate.
Political uncertainties make investors nervous. Nervous investors tend to pull back and hunker down. When investors hunker down, recessions arise. This is likely why market analysts are increasingly predicting the next recession to occur in 2020.
All this points to the fact that if the housing market is to improve at all in 2020, it will do so very, very late in the year after the November presidential elections. This will then coincide with the onset of the winter holidays when the housing market historically tends to fall flat for all concerned until the new year.
This data also plays into the expert prediction of a housing shortage starting in 2020. Along with the explosion of freshly-minted 30-year-old millennial real estate shoppers, which may bring a residential property shortage in its own right, the onset of a recession sends a signal to owners to sit tight and stay in their property rather than list it, further reducing available inventory and spurring competition.
As a prospective house buyer, when you make a smart purchase now, invest in needed or wanted property upgrades to your new abode, rake in the current-year tax incentives and credits for your purchase and upgrades and settle into your new property, 2020 will be a year of calm for you personally – regardless of how the political climate plays out.
Every year and every season has its pros and cons, its upsides and downsides, in terms of reaping potential rewards from selling or buying a residential property. Rather than identifying the single most ideal time to take that house-buying plunge, the smart play is to notice when buying conditions seem more favorable in your own life and in the greater residential property marketplace.
In this way, instead of trying to “play the market” like a gambler hoping for a big win, you are simply identifying the time that feels right for you to buy your beautiful new house. If you are ready now, fall 2019 looks like a great time to buy!