Reasons to Buy a Home Before the End of the Year
Thinking about a buying a home in the near future? You may want to buy even sooner than planned — before the end of the year. Here are our top reasons for buying a home in the Winter:
The Big One: Tax Benefits
If you buy before New Year’s, you will enjoy some significant tax benefits. Here’s the breakdown of what you can deduct from your 2017 taxes:
Closing costs. Closing cost deductions allow you to claim the points or origination fees on your new mortgage. This deduction only applies for the year in which you closed the loan. So if you wait until January to buy, you will have to wait a whole year to enjoy these savings.
If you are taking out a $500,000 loan and paying 1 point (or 1% of the loan amount) for a lower interest rate, that translates to a $5,000 tax deduction for the year!
Mortgage Interest. Since early mortgage payments are mostly interest (vs. principal), these deductions are significant and can really benefit buyers who are not able to make a big downpayment and first-time buyers. For example, a buyer taking out a 30-year loan of $500,000 at 4% will save $100,617 in taxes over the life of the loan (based on a 28% tax rate). That is $279 per month in savings!
Property taxes. Why not start the ability to deduct your property taxes now? If your taxes are paid out of an escrow account, check your mortgage statement for the amount paid in 2017.
In the City of Alexandria, for example, in tax year 2017, the real estate tax on a residence assessed at $600,000 is $6,780 ($600,000 x 2017 tax rate of $1.13 per $100). or $565 per month. Buy now and you can enjoy the deduction of any 2017 property taxes you pay.
Be sure to read our article on all of the tax benefits of homeownership.
Interest Rates are Low
Rates will likely go up again in 2018. While interest rates are still quite low, why not consider buying a home in the Winter before they increase again?
Inventory Will Remain Low
Housing inventory’s been low all year. For example, in the second quarter of 2017, the unsold inventory of homes (as a share of all households) was just 1.9 percent – and was the lowest second quarter percentage in 30 years!
One reason for the shortage that experts seem to agree on? Baby boomers and retirees are staying put more than they previously did. This generation of retirees does not seem to be migrating to warmer climates and/or downsizing at the rate previous ones did.
Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. What does that mean for you as a buyer? You have more homes to choose from today than you will next year.
Fewer buyers are out looking this time of year versus the busy spring months. This is especially important when inventory is so low.
Fewer househunters = less competition for you.
Prices Will Continue to Rise
Experts also expect homes values to continue their upward trend in the new year. So if you’re thinking of a purchase, it’s likely best to make your move now before home prices go any higher. For more on how the current market is performing in our area, click here.
Sellers don’t want to have to carry their homes any longer than necessary, especially into a new year. Home sellers are often more motivated (in other words, willing to negotiate on price) at this time of year.
The Bottom Line
Buying a home in the winter is perfect. You will enjoy significant tax breaks if you buy before the end of the year. Not to mention you’ll have more homes to choose from, less competition, and more bargaining power. Why not be in a new home to ring in the new year?
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