Inflation. Interest Rates. Recession.
Inflation. Interest Rates. Recession. These words are top of mind for anyone thinking about buying or building a new home.
Today, we’re going to talk about each of these and what it means if you’re looking to build a new home in this rapidly-changing market.
How Inflation Impacts Homeowners
Inflation has been felt across the country with higher prices for everything from fuel to groceries. With a higher percentage of Americans’ paychecks going to everyday expenses, many people are wondering if buying or building that new home is a good idea.
What is important to know is that real estate can actually be a hedge against inflation for three main reasons.
- In an environment of rising prices, housing prices can also rise and increase the value of your home.
- Mortgage rates are fixed and do not rise with inflation. Your payment is locked in for the full term of the loan no matter what happens with the market.
- Rent increases with inflation so homeowners can generate higher income by renting their home (or a portion of their home) while their mortgage rate remains unchanged.
How to Finance a Home in a Rising Interest Rate Environment
Back in 2000, the typical mortgage rate was over 8%. In most recent years, home buyers have enjoyed historically low interest rates. Mortgaging a home for under 4% was the norm. Today, with the Federal Reserve raising interest rates and mortgage rates following the trend, it is becoming more expensive to finance a home.
Many people are wondering if they should wait for rates to come down before home shopping or if they should jump in now as the Fed has stated more rate hikes are likely.
One way to lock in a lower rate now is to consider an Adjustable Rate Mortgage (ARM). ARMs have a fixed rate for a specific period of time – 7, 10, or even 15 years. After that period, the interest rate adjusts to the current rate.
If you are building a new home and require a construction loan, there are some great options available.
NDI spoke with Dan Murtaugh of WesBanco about construction loans and he shared his insights.
“Construction to Permanent is a great way to finance the purchase of or refinance of a property and the costs associated with building a new home. Wesbanco offers a One-Time Close that allows you to lock in the interest rate upfront and make low, interest-only payments during the construction period. With traditional new home construction loan programs, you cannot lock in the interest rate until you are within 60 days of the home being completed. This puts the buyer at risk of their rates increasing while the home is being built, which is what is happening now.”
The key here is that there are financing options that can help you build your dream home no matter what happens with interest rates.
Recessions and Real Estate
In a recent study by MagnifyMoney, 70% of Americans think that an economic downturn is on the horizon. There are certainly economic figures to back that up.
However, it’s more important to know what has typically happened to home prices in recessions than to try to predict if a recession is coming.
This is what CoreLogic had to say about housing prices and recessions:
“First, broad and deep troughs in housing prices is the exception, rather than the rule, during recessions. If we look at the past five recessions, we see that home prices typically weather down turns quite well. For example, home prices grew 6.6 percent during the Dot-Com recession in 2001. And during the 1980 and 1981 recessions, prices grew by 6.1 percent and 3.5 percent, respectively.”
The data here is very encouraging that an economic downturn or recession doesn’t have to mean that your home will lose value or be a bad investment in the long term.
The Bottom Line
When financial markets begin to shift (up or down), we should remember that everything is cyclical. There are ups. There are downs. There are recessions. Market corrections are uncomfortable, but they are critical for maintaining an overall healthy market.
At NDI we believe that there is nothing more sacred or personal than a home, and we create a custom approach with every home we build.
We’re not just homebuilders, we’re home advisors. Our experienced team of builders, project managers, and designers carefully review each of our client’s situations, budgets, lots, and dreams to advise the best approach for the project.
The process of building a custom home doesn’t have to be stressful or expensive. Here is a quick look at how we work with our clients:
A one-on-one consultation to hear the vision for your dream home. We’ll present matching customizable models in case one makes a good fit. You can take a tour through our custom homes here. Otherwise, we’ll craft a design based on your preferences.
We discuss any adjustments to the plan before submitting the plans for approval.
You get to make all the exciting selections for your new custom home—everything from countertops to cabinets to flooring. Our Design Consultant will guide you every step of the way.
When you are 100% satisfied with your selections, it’s time for our Construction Team to get started. We’ll meet you on site at every important stage in the construction process. NDI takes care of everything—permits, demolition, laying the new foundation, framing your house, installing quality trimming and more.To learn more about how our process works, click here.
We’re proud to be a family-run business. When you build with us, you become part of the family.
“If you want to build a new house NDI is the company to use!! From start to finish the team was with you! The family aspect of the company is what I loved the best. They care about their clients and build a quality product at an affordable price!”
Christina V.
Yancy Model
Satisfied Homeowner Since 2015
“NDI built our dream home and we love it!!! Their team from the beginning to end was incredible and would highly recommend them to anyone interested in building!!”
Hollis G.
Chesterbrook Craftsman Model
Satisfied Homeowner Since 2016
Working with first-time homeowners, experienced homebuyers and investors, NDI’s depth of experience creates faster turnarounds, lower costs and forever clients.Contact us today at 1-800-406-8555 or email us directly at hello@newdimensionsinc.com to learn more about building your custom home with NDI.
At NDI we nurture the vision of our clients and celebrate their individuality.
My name is Jennifer Landers, and I’m the President of New Dimensions Inc.
We have been building high-quality custom homes in Northern Virginia since 1988! We absolutely love what we do and how we impact the lives of our customers.
At New Dimensions Inc. we don’t just build homes, we provide exceptional quality and value through our personalized approach. We’re passionate about working with our clients to build a house they’re proud to call home.
We’re excited to lend our years of home building experience to your project, providing the information, planning and skills to make your dream home a reality. That’s where we can help provide you with the information you need to make the best decision for you and your family.
We look forward to speaking with you soon!
Sincerely,
Jennifer Landers
President, New Dimensions Inc.
Take a Virtual
There’s nothing more exciting than walking through a model home selecting features you like and imagining yourself living there. Take a spin through the extensive variety of homes we offer at NDI and let us know which home feels like a fit.
The President’s Blog
In the NDI blog, you’ll get to know our president, Jen Landers, while she shares the ins and outs of building custom homes, some insights on running a family-owned business and personal stories that will resonate with most of you.
Benefits of Custom Build
Our Complete Custom Program allows you to take your design from concept to completion in not much more time that it takes to build from our portfolio. Bring us your hand sketched design, and we’ll work with you to turn it into your dream home.