Really want to buy a home right now but you feel like this market is too nuts for you to join? Let’s take a step back and analyze the bigger picture. This week, we are going to take a brief break in the investment property series to discuss why it’s important to dive into the home buying market now instead of waiting for later.
Barrier #1: High Prices
Even though people are finally starting to come around and realize that this market isn’t going anywhere and these prices are the new normal, so many people are still precluded from buying because they just can’t imagine paying $280,000 for a three bedroom ranch. Well, let’s look at it this way. Sure, you could have bought that house for $200,000 three years ago, but your interest rate would have been around 5%. Today, that same house has increased 80k in value and you will only pay about $200 more a month due to a low 3.5% rate. Your rate would have been even lower had you purchased it six months ago. Interest rates are only going up guys, but these prices sure aren’t going down! ? We might get lucky and see a correction in 2025ish, but that’s three years of paying outrageous rent prices and throwing money down the drain.
Barrier #2: Crazy Competition
Maybe the prices don’t scare you. Maybe you do want to jump on these mortgage rates while they are still low. But….you aren’t a fan of competing against 30 other people and having to potentially overpay for the home. I hear you. It really is nuts out here. However, if you have enough money in the bank to play with, you can get in the game. We can structure your offer to best meet the seller’s needs. If you are quick enough and aggressive enough, we can definitely find you a house. And just like the prices, this competition isn’t going anywhere. In fact, it’s just going to get worse once spring/summer hits. So if you are trying to buy, better get on it now! You’ll never win a game you don’t play. ?
Barrier #3: Fear of Being Underwater
Many people are scared to buy a house right now because they think their home will be worth a lot less in a few years and then they will have negative equity. First of all, it’s not 2008. The market isn’t in a “crisis” and it’s not going to crash. It will probably correct itself, but a huge plummet is unlikely. So if you end up with a little bit of negative equity, you won’t be hurt at all because you will have secured a fixed rate mortgage. 2008 went bananas because people took out flexible rate mortgages. Therefore, when the market flipped and their interest rates rose to the moon, so did their monthly payments (which they could no longer afford). You, however, are going to take out a fixed rate mortgage so that when the market changes, your interest rate will not. Your principal and interest payment will stay the same as it’s always been. Then, when the market climbs back up again (as it always does), you will regain equity in your home.
Barrier #4: The Need to Have Your Dream Home Right Now
There is a large group of people who are simply priced out of the market because their dreams don’t match reality. They have an idea in their head of what type of home they should be able to purchase at this stage in their life, and when they realize that this type of home is WAY over their budget, they just quit and continue renting. We are moving away from the idea of “starter” homes and want to just save up and wait until we are completely ready to purchase the home of our dreams. However, what many people aren’t realizing is that purchasing a smaller home is an investment. There are also people who say that our society no longer offers starter homes because everything is overpriced. I beg to differ. There are plenty of homes for sale under 150k. A monthly mortgage payment at that price point will be much less than today’s rent prices. So if you can pay rent, you can surely buy a home. At the end of the day, though, if you are in this boat, then you can’t purchase your dream house right now anyway. So, instead of throwing all your money away on rent, you could purchase a smaller home and build up equity in it by paying down your mortgage. Then, when you are ready and able to purchase your dream home, you can sell your small home and turn its equity into a down payment for your larger home. You just trade up.
Is the market tough? Yes. Is it impossible? No. If you are able to purchase a house, I suggest you at least try. ??♀️