You might have been thinking about buying a home, but after looking at the current market you asked yourself, "Should I just wait until prices come down?" This is a common and reasonable question. After all, home prices keep going up!
To help you answer that question, I have another just as important question for you: Do you own the home that you live in now? If the answer to that is "no," then you should definitely consider buying now.
No matter what is going on in the real estate market you will always need a place to live right? And you might say you can't afford to buy right now but I would counter by saying you can't afford to not buy, and here's why.
According to the U.S. Bureau of Labor Statistics, prices for housing are 861.22% higher in 2022 versus 1967 (an $861,218.07 difference in value). Between 1967 and 2022 housing experienced an average inflation rate of 4.20% per year. This rate of change indicates significant inflation. In other words, housing costing $100,000 in 1967 would cost $961,218.07 in 2022 for an equivalent purchase. Compared to the overall inflation rate of 4.01% during this same period, inflation for housing was higher. So buying that house within the last 55 years you would have seen an average appreciation in its value of 4.2% per year. Buying a home at any time over the last 55 years would have been a smart decision from an equity standpoint.
Waiting until rates come down
Some folks inevitably will want to wait until interest rates come down so let's talk about interest rates and waiting for them to â€œcome down.â€
According to https://themortgagereports.com/61853/30-year-mortgage-rates-chart mortgage rates rose sharply in 2022. But throughout history, mortgage rates have often been higher â€” sometimes much higher â€” than they are today. The long-time average for 30-year mortgage rates is just under 8 percent. So even though todayâ€™s mortgage rates are hovering around 5%, theyâ€™re still a good deal by comparison. Average mortgage interest rates average just under 8% here in the US so the 5-something rates we are seeing right now are for sure something that you will want to consider taking advantage of.
Down payment costs
The last hurdle most people face is the down payment and closing costs, that large chunk of change that you have no idea where it's coming from. Let's talk a bit about that and figure out what you are going to need to meet with a real estate professional and a lender for a consultation on exactly what this costs.
For most folks, you can do a 3.5% FHA loan, or if you served our great country and you or your spouse is a veteran you might qualify for a 0 VA Loan. Whatever this is, figure out how much you will need to set a target and start saving! Don't forget to include closing costs which will be about 2.5% of your total purchase price.
The cost of waiting
Last but not least let's talk about the hidden costs of waiting: the 4.2% a year in equity you are not gaining plus whatever your rent cost is. Here in North Orange County rent is about $3,500 per month for a 3-bed house. That's 42K per year paying someone else's mortgage! How long you are willing to do that?
Waiting to buy has costs that sometimes we see and sometimes we don't. It's always more expensive to wait than to set a goal, start saving and buy now. If you're still hesitant about buying a home, ask us about our 24-Month Buy-Back Guarantee where we guarantee in writing to buy your home back from you or sell it commission-free for the first 24 months if you're not satisfied with your purchase.