There’s one question all of our buyers are asking, “have prices gone up too much, too fast, for me to buy now?”
This is not an easy question to answer. Maybe it is, maybe it isn’t. It’s still too early to know.
For those getting ready to buy, it certainly feels a bit riskier than it did just six months ago.
There are three issues confronting today’s buyers:
1) Interest rates are likely to go up
2) Prices feel like they could go down
3) There are still not enough homes for sale to meet buyer demand.
For the buyer that is buying and selling at the same time, the real issue is just the interest rate. Whether the value of homes goes up or down, either way they own a home. This buyer just needs to focus on making the move while interest rates are still way below historical averages. There is no harm in them making the move now.
What about the first time buyer? This can feel a bit more tricky as they are worried about two things that are in conflict with each other. They worry about overpaying if prices should fall. They also worry about getting priced out should interest rates continue to climb. Whether they buy or not, either way, it feels like they can lose.
There is good news though if you plan on living in your home for the next 10 years. Historically, if you purchase a home using a 30 year fixed mortgage, keep it for 10 years, you should end up in a positive equity position. There might be a few negative equity years in the beginning, however, two things work in your favor. First, real estate prices tend to be higher 10 years later. Second, 10 years of mortgage payments will put a nice dent in the loan balance.
Despite today’s uncertainty, appreciation and debt reduction should make today’s buyers very happy 10 years from now. The beauty of investing in real estate is that the longer you hold the home, the better your investment tends to be.
