With the craziness that is today’s real estate market, a popular question to ask is whether you should buy a home now or wait to see what the market does. The thought process behind this is that if you wait, home prices will drop. Prices have been skyrocketing ever since the pandemic, but how long can that last? Can the market sustain these high prices, or will home prices fall in the future?
Lets talk about the real reason we are asking this question: we are worried that we will pay too much for a home, only to see the prices drop with the next two years. Homes are expensive, so the last thing you want to do is to pay too much for a home.
We need to take a closer look at both sides so you can get a better idea of what you should do. Let’s start with why you shouldn’t buy a home right now, or why you should wait.
Don’t want to Pay Too Much for a Home
Prices are very high now, and seem to only be going higher. Home prices increase by over 16% from 2020 to 2021. TO put it into perspective, a home that cost $200,000 in 2020 now would then cost 232,000 in 2021. Anyone who paid attention to the market knows prices only increased further in 2021.
Experts say that housing inventory will stay low, and prices will continue to rise due to high demand. Of course, you may be skeptical of this, because let’s face it, when have the majority of the experts said that the market will crash, or that prices will decline? It most likely won’t happen, because that will cause widespread panic, which will cause the market to actually crash! No one wants that.
Buyer Competition is Too High
The big issue is that there is just too much buyer competition out there. There are just too many people fighting over homes and not enough homes for sale. It’s pretty common now to place an offer on a home only to find out that you were beat out by someone who paid over the asking price.
Don’t Have Enough Money Saved / Finances Aren’t in Order
I know there are a lot of first time home buyer programs out there such as the FHA. The market is so competitive now that people are finding it hard to get their FHA offers accepted. Sellers aren’t as willing to accept FHA offers now because there are so many buyers out there that they don’t have to! This also goes for asking the seller to pay closing costs. Sellers aren’t as willing to do that because they simply don’t have to anymore.
This means that in order to have a better chance of getting a home, you will need to have enough money saved up so you don’t have to ask for the seller to pay closing costs, and you have enough money saved up for a down payment. If you don’t have your finances in order, you may want to think twice about getting into today’s home buying market.
Why You Should Think About Buying Now
If you want to buy a home but want to wait it out just to see what the market does, that may not be the wisest choice. The reason is because no one can predict when the market will actually fall, or how far it will fall if it does. For example, what if you wait a year to find a home only to find out that home prices went up 25%? In that case it would have been better to buy at first. Timing the market in this way is extremely hard to do, and I wouldn’t recommend doing it when looking to buy a home. Even with all the info we have at our disposal, it is impossible to know the future. After all, who knew that a worldwide pandemic would lead to home prices skyrocketing in the first place?
You Have an Immediate Need to Satisfy
When we talk about whether to buy a home or not, we often talk about the investment/financial aspect of buying a home. When buyer’s actually buys a home, the main reason they choose to buy isn’t because they simply think it’s a good investment.
The bigger motivation for many people who actually buy a home was to take care of an immediate need that they have. For instance, they have a large family so they want more space. Maybe they are getting older and want a home with no stairs. Maybe they don’t like the current neighborhood they are living in and want to move to a better area.
When it comes to housing, its not always just about price. Housing is a necessity, and we all need somewhere to live. There will always be a demand for homes, no matter what the price is. For example, my car only takes premium gas, which is almost $5 a gallon. I don’t like the price, but I really don’t have that much of a choice but to pay it if I want to use my car, which I need to in order to make money!
Interest Rates are Still Historically Low
Even though the Fed plans to raise interest rates, interest rates are still very low when compared to previous years. This means that it is still relatively cheap to get a mortgage. These interest rates aren’t going to stay low forever, so it is best to take advantage of these low interest rates now while you can.
Rental Prices Are Also Rising
Also, if you look at the alternative to buying a home, which is renting, you will see that rental prices are also increasing just as fast as home prices! Rental prices also increased over 10% in the last year. Whether you rent or buy, you will have to deal with these price increases.
If you want to buy a home to take care of an immediate need such as relocating or needing more space for a growing family, you might as well do it sooner while the interest rates are still historically low. because the alternatives aren’t any better, and interest rates are still historically low.
If you don’t quite have your finances in order, you may want to wait until your situation is better, because the market is so competitive now that you may not be able to get your offer accepted.
As always, feel free to reach out to me here if you have any questions or comments. Thanks and have a great day!