One of the most common questions that our clients ask has to do with the timing of buying their Classic Home. Why buy now? Should we wait until prices go down? Maybe the Federal Reserve will lower interest rates?
The Federal Reserve raised interest rates four times in 2018 and nine times since December 2015. The rise in interest rates combined with other economic factors has already led to a significant increase in mortgage rates.
• In 2016, mortgage rates were as low as 3.42%.
• At the beginning of 2018, 30 year mortgage rates averaged 3.99%.
• Today, the rates average 4.51%.
Heading into 2019 the Federal Reserve has suggested to expect two rate hikes for the year. In recent weeks, economic factors such as the partial U.S. government shutdown have caused some new uncertainties. However, the Fed members still seem confident in future rate increases.
The NY Times notes that notes from the latest Federal Reserve meeting suggest they still expect increase by the end of the year. MarketWatch quotes Chicago Fed President Charles Evans as stating he expects rates to “eventually” rise as high as 3% – 3.25%.
If you plan to build in the next few years, it’s likely best to lock in your interest rate sooner than later.
In our October blog post we discussed rising demand, builder costs and consumer prices. The post focused on the rising and unpredictable cost of lumber. Other issues touched on are still factors going into 2019, such as government regulations, tariffs, labor and transportation costs.
Even a simple local government decision to upgrade the standard of silt fencing can increase costs for a single build by $1,000. Changes like these can be frequent, as local governments typically review construction standards every three years.
At Classic Homes of Maryland we do everything we can to provide our customers with the best value for their investment. While new home prices have steadily increased over the past few years, our prices haven’t changed since the summer of 2017.
Prime Lot Availability
Land is becoming more and more limited, particularly in many of this area’s most popular zip codes. Investors continue to purchase and hold prime real estate, removing properties from the market for years. It’s best not to wait if the zip code of your dreams is in high demand, whether it be due to area schools, access to amenities/commuter routes, or beautiful scenery – it’s unlikely prices or availability will improve.
It’s also possible new regulations could delay or entirely prevent building in specific areas. Last year Montgomery County, MD announced a temporary moratorium on new subdivisions in parts of Silver Spring, Wheaton and Bethesda, due to school overcrowding.
According to Montgomery County Planning Department website, a “School Test” is performed every year, to determine the impact of school growth, and if further moratorium are necessary.
Start the process of planning to build the home of your dreams with Classic! Give our sales team a call at 301-256-4110 for help finding land, understanding site work, choosing your model and more.