Is Now the Best Time to Buy a Home or Should You Wait?
With the current real estate market, is it a good idea to buy a home? This is a conversation I just had with a client and I wanted to share my take on this question.
So I met this client (we'll call him Joe to protect his identity) about four years ago, and he had been saving to buy a house. Today he has great credit, a good solid career, and plenty of money to cover the down-payment and closing costs. Based on our meeting I recommended some homes in an area of town that I knew would be a good fit for his needs, and it's a nice safe area with values increasing very well.
At that time homes in this part of town were going for about 350K. After some looking and debating Joe decided to "wait and see what happens with the market." Houses in that same neighborhood are going for over 550K today, meaning that if Joe had just done a 20% down payment and invested just a little over $80,000 total in the purchase of a home, his return on just his dollars invested would be over 250%, and he would have spent the last four years paying for his home rather than his landlords, which is another $48,000 Joe has paid in rent in the last four years.
I can also tell you the story of Sally who, when I met her, was looking for "a good deal" and "waiting for the market to crash before buying." Sound familiar? Today Sally is still waiting for the market to crash.
I have met these people my entire career since the '08 crash who are waiting for it to happen again. So if you ask me if I think now is a good time to buy a home, I am probably going to ask if you own the place that you live in now. If the answer to that is "no," then yes, this is the best time to buy a home.
If we look at home values since 1970, they have continued to increase over every ten-year period on average. Yes, every ten-year period. Even after the 2008 crash within ten years, values were back up to equivalent or higher than they were before the crash.
So from an equity standpoint and from a financial standpoint buying a home sooner rather than later makes sense. But what if you are one of those people who when interest rates were 2.5% were waiting for them to drop even lower before you buy? The truth of the matter is that the average interest rate is about 7.5-8% and the rates that we have now at around 5% are likely the best rates we are going to see for a long time to come, so you would benefit yourself to buy sooner rather than later if it's available for you, and then plan that if interest rates take a significant drop you can refinance at that time.
Waiting to buy until interest rates drop is just agreeing to continue paying your landlord's mortgage rather than your own.
In conclusion, nobody is able to effectively time the market, and all of the stories you hear about people doing it mostly just got lucky. Waiting to buy a home only hurts you and delays your investment in your long-term financial future.
If you have been considering buying a home and are still hesitant, call us at (714) 406-1414 and ask us about our 24-month buy-back guarantee where we guarantee in writing to buy your home back for a full 24 months if you're not satisfied with your purchase.