You simply can’t afford to miss out on today’s real estate market. It’s a great time to buy a home. Some are wrestling with this decision as they compare the state of today’s market with where it was no more than ten years ago. They see how prices have gone up tens, and even hundreds, of thousands of dollars on the same properties. Some feel they may have missed out on the best deals. Others feel irked by paying more than what a property sold for in the previous month. Even a few people question how much higher property values will go if they buy today. Many are looking at the wrong metrics, and are asking the wrong questions altogether; they are overlooking the most important factors. So why is buying homes and investment properties so critical right now? What factors should you be looking at?
1. Property Prices: As the U.S. property market continues to recover, historical price graphs show that most people have made money. That includes those that purchased at the height of the last boom. There are some pockets of the market which haven’t quite reached that point yet, as well as foreclosures, and other deals which offer discounts. However, the point is this: those that are looking for a home are going to find it hard to go wrong. Aside from some occasional fluctuations, real estate values are just going to keep on going up over the long run. Sure; if you didn’t buy last year you might have missed out on making a few thousand dollars, but that will almost be meaningless in the longer term. The longer you wait, the more you’ll miss out on. Even if you can’t get into the house you want, most realize that buying a home is the best way to build equity and a save up for your dream home.
2. Interest Rates: Interest rates are the real game changer. Mortgage interest rates are still at ridiculous lows, and they make all the difference. Everyone is aware that the feds are set to launch a new rate hike initiative. Very, very few have any idea of how high those rates can go, and how fast. You might remember when rates were seven percent a few years ago. However, that is low in comparison to where rates have been in the past. Freddie Mac’s data on mortgage interest rates shows they have been over 10% multiple times, and that’s if you had decent credit. If you don’t, rates could go even higher. Even a couple percentage point increase can make the difference of paying hundreds of dollars more per month for the same property, and perhaps a hundred thousand dollars or more difference in how much you’ll really pay for that property over the long haul. Rates matter far more in the cost and value of a property than the asking price does. Don’t miss out on today’s low rates.
3. Rents: We’ve all witness how dramatically high rents have risen in the past few years. Yet, few understand how much difference this will make in their lives if they stay as renters. If you think buying is too expensive right now, then you certainly can’t afford to rent! In renting, you are paying someone else’ mortgage. So if you can rent now, you can probably afford a mortgage. Few also realize that while property asking prices have gone up and down over time, rents have almost always risen. Data shows that, with the exception of a blip in the 1940s, rents have gone up every year for as far back as they have been tracked. Home owners lock in low payments that stay in place for 30 years, or until their loans are paid off and they no longer have a house payment. Renters have to pay rent forever, and that number normally goes up every month. So while your homeowner neighbors are enjoying more wealth and extra money, you’ll have less and less money each month as long as you rent.
4. Availability: Availability is a growing issue for both buyers and renters. Savvy individuals and companies are buying up all the real estate they can, and plan to hold it. That leaves less and less to buy, especially with builders moving so slowly, and trending towards building rentals. At the same time, many of these properties are being converted to rentals buy institutional landlords and newbie investors. These landlords are becoming increasingly demanding.
Keeping all of this in mind, can you afford not to buy a home right now?