Is it a good time to buy a home?

Increasing home prices and lack of housing inventory continue to be the talk of the mortgage and real estate industry.

With the increase in home prices, many buyers are wondering if now is the right time to purchase a home. The latest Fannie Mae Home Purchase Sentiment Index showed that 66% of those surveyed said now is a bad time to buy a home due to rising home prices.

The rising prices have been offset by the historically low interest rates being seen today. As of mid-August 2020, the average rate for a 30-year fixed rate mortgage was slightly (about 10 basis points, or 0.1%) lower than it was a year ago.

If you look back two years ago, the average 30-year fixed rate was at 3.6% and back in 2018, the average was at 4.53%. Looking at the data can give you a better idea of just how low rates are staying.

More potential homebuyers did jump on the brief drop in rates at the end of July and into the first week of August. The weekly activity report from the Mortgage Bankers Association shows a 2.8% uptick in mortgage applications for the first week of August, which we have seen locally in the Dubuque area as well. The Mortgage Banker’s Association (MBA) noted that refinance activity has again hit its highest level since February 2021.

Although high home prices have been mostly offset by historically low rates, potential homebuyers are finding it difficult to get past the price tag. That said, renters aren’t getting much of a break either. The latest Rent Report from Apartment Guide ( shows the average national cost to rent a two-bedroom apartment is up 4.8% annually.

In many cases, you can pay less for a monthly mortgage payment that you can for a rental payment – while building equity and gaining the tax benefits.

If you’re waiting to buy a home until demand decreases, you aren’t alone, but you might need to continue to wait. The future of the housing market rests largely on the economy and the return of the labor market. The Fed will be looking to see at least a few strong jobs reports in a row before it will start to taper its bond purchases.

It’s these bond purchases that have kept the housing market moving forward as COVID-19 put pressure on the economy. Until then, enjoy the low rates and take advantage of home purchase and refinance opportunities as they arise.

Inflation: Transitory or here to stay?

The Fed’s stance that inflation is temporary took a couple of hits this week with the release of some closely watched data points. For the second-straight month, the consumer price index (CPI) remained at a 20-year high with a reading of 5.4%. The core CPI, which excludes more volatile measurements like energy and food prices, rose by less than expected on a monthly basis. July’s data shows a 0.3% increase, against expectations of a 0.4% gain. The core CPI showed a 4.3% annual increase.

The core CPI report boosted the stock market and kept the yield on the benchmark 10-year Treasury note relatively unchanged. This is important to note, as mortgage interest rates follow the rise and fall of the 10-year Treasury.

The producer price index (PPI) told a much harsher story. The Labor Department reported the PPI rose by a whopping 7.8% annually — that’s a record high since the data point started being measured in 2010.

One positive was a third straight week of declining jobless claims. The Labor Department’s weekly jobless claims report showed 375,000 initial claims of unemployment. Continuing jobless claims also fell, hitting 2.86 million for the last week of July. That’s the lowest level since mid-March 2020.

The choice of when to purchase a home is a personal one. It can be a challenge to time the market, even for the most seasoned investors. Keep in mind that even if you’re renting, you’re likely paying a mortgage — it’s just your landlord’s.