Why You Shouldn't Wait to Buy a House

Yes, prices are up and mortgage rates are rising, but history suggests that waiting probably won't be the right choice.

Everyone needs a place to live. 

Yes, some older "kids" might move back in with their parents for a few years and some people opt into work situations that come with housing -- like joining the military, working on a cruise ship, or opting for the Peace Corps -- but nearly every American needs to rent or buy a home.

Whether you should rent or buy has always been a big question.

In a broad sense, it makes sense to rent if you might have to move within a few years. Buying a home comes with all sorts of one-time costs that might not be recouped if you move on quickly.

And, while house prices have generally steadily gone up, there's no guarantee that that will be true at the exact time you have to sell.

If, however, you plan to spend at least a few years (maybe three or more) in the same place, buying generally makes sense, especially when rental pricing has increased so much.

If you're thinking about buying a house, history says that now is almost always the right time to buy. 

Looking at the chart below shows that there have been some dips in median house prices, but over time, the price of a house generally increases.    

Why Now Is Almost Always the Best Time to Buy a House

In the first quarter of 2020, the median U.S. house price came in at $329,000. That's up from $289,200 five years earlier, and a huge increase from $222,900 in 2010. 

Over 10 years, the median price increased by over $100,000, and while it was not a straight-line increase, the numbers steadily rose.

If you wait to buy a house, history suggests you will pay more if you wait. That always begs the question, "But are we in a housing bubble?"

The reality is that bubbles tend to be regional. 

Yes, there are markets like South Florida which have seen prices rise dramatically due to the pandemic. It's possible there's some price correction coming in markets like that, but there's no guarantee.

Florida remains affordable compared to New York and is there any reason to believe that more companies won't open locations in Miami, Fort Lauderdale, and West Palm Beach going forward?

Yes, there could be a drop in prices, but history suggests that on a national level, the price of a house always goes up when you look at multi-year periods, not quarters. 

Should You Buy a House Now? 

House prices have not only been rising, but mortgage rates, which have been in the 2% to 4% range for years, have in some cases, topped 5%. 

That is causing some potential buyers to hit pause, but it's important to actually consider what higher rates mean. 

If, for example, you take a $400,000 loan, here's what your payments would look like at different interest rates:

  • 3%: $1,686 a month

  • 4%: $1,910 a month

  • 5%: $2,147 a month

So, that $224 per month for the increase from 3% to 4% and another $237 per month when you go from 4% to 5%. 

That means that if you missed out on getting a mortgage with a 3% interest rate, you'd be paying $461 more per month on your $400,000 three-year loan.

The problem, and it's a big one, is that there's no guarantee when (or if) mortgage rates will come down. 

Higher rates could also limit people's buying power and slow down the increase in housing prices, but low inventories in many hot markets suggest that won't broadly happen.

In reality, if you plan to live in an area for an extended period of time, it's a good time to buy a house if the price of owning comes anywhere close to the cost of renting. 

When you own a home you build equity and history shows that if you give it long enough, prices eventually go up.

There are, of course, always exceptions and a good Realtor should be able to help you to avoid those. 

Old adages like "don't buy the nicest house on the street" sometimes have some truth in them. 

But the numbers don't lie and throughout the 57 years tracked by the Fed, "now" has generally always been the best time to buy a house since "yesterday" isn't an option.

SOURCE: TheStreet.com

Gina Madeya

Whether you're thinking of buying or selling your home, being successful in this market takes an experienced, trusted advisor with proven results. Gina has enabled over 200 clients to achieve their real estate goals and looks forward to helping you navigate the current market with clarity and confidence. As a 25 year veteran of corporate America (JPMorgan Chase and Microsoft), Gina puts her vast experience in both people and program management positions to work for you, nimbly balancing both the human and process side of real estate transactions to ensure your success in either buying or selling your home.

Lauded by clients and other agents alike for her impeccable work ethic and integrity, client advocacy, and proactive communication, you can count on Gina to guide you through every step of this complex and very active market with hands on support to deliver an experience and results you deserve. Backed by the most trusted brokerage in the Pacific Northwest, Windermere, Gina considers it a privilege to represent you and pledges her focus, responsiveness, honesty, patience, and never-ending support - she won't be satisfied until you are!

https://www.ginamadeya.com
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