With interest rates high, and home prices trending down, is now really a good time to buy a house? This is a popular question, and the answer for each person is going to be different. To really figure it out, it’s helpful to ask yourself a few questions, and then weigh the pros and cons of each.
1. How long do you plan to stay in the home for? Markets go up and down, they are cyclical, but historically real estate prices recover and go up. You’ve probably heard the saying “time in the market is greater than timing the market.” If you are planning to be in the home for the long haul, then you are likely going to outlast the current market cycle. If you plan to sell in a year or two and exit the market completely, then you should think twice about buying a home.
2. Why are you trying to buy a house? There are a lot of good reasons to buy a home. Maybe you need more space for your family. Your current home is too small, it feels chaotic and is causing a lot of stress. Maybe you are paying a TON in rent and the mortgage payment would actually be very similar to your rent payments. Maybe you are living at home and are looking to buy your first home, to give you some independence and space. Whatever the reason is, you have to decide if the benefits of buying a home outweigh the potential of the market dropping, or interest rates improving. Regardless of where you live, you will need to pay for a roof over your head. A primary residence should not be thought of as an investment, you are always going to be paying for housing so what makes the most sense for you?
3. What would bother you more: If you bought a house and in two years from now it was worth less or if you did not buy a home, and in two years from now the value of the home was more? Remember that prices are often tied to what the interest rate is, so when rates go down, prices often increase and vice versa. Interest rates change, but what does not change is the price of the home you paid. Key considerations:
Remember, real estate is a long term game and you win or lose when you exit the market altogether. What we mean by that is, even if you buy a house, and prices go down and you find yourself in a position where you need to get a bigger house, prices would have gone down on that home as well so you would sell at a lower price, and buy at a lower price. It is all relative. It really only matters when you exit the market all together.
If you are a first time home buyer consider buying a duplex and renting out the other part of the home.
Prices have come down considerably and there are options on the market. Right now you can get a place with all the conditions you want, and in some cases 20% less than a year and a half ago. There is flexibility in the market today.
At the end of the day it comes down to you and your level of confidence. If you plan to have to sell in 2 years, or it would really bother you if values came down, or you have a great rental price that is allowing you to save money and you have the space you need, maybe it does not make sense to buy right now?
On the other hand, if you’re in it for the long haul and aren’t worried about prices and rates and you need a place to call home, it’s probably worth exploring taking advantage of the current market slow down.
As always, consult with a professional in the business to help see what is right for you.
Click here for steps on How to Buy a House.