Why are homes more affordable now than ever before? Let’s discuss this.
One of my old mentors told me a long time ago that prices are a one-time thing; your monthly payments and your interest rates are what you have to see every month.
If you were to buy a $1-million property today with a 3.25% interest rate and 20% down, your monthly payment would be $3,482. If those rates went up to 4.25%, your monthly payment would be $3,936—that’s a $500-difference for just a 1% increase!
If you’re thinking about waiting until prices fall to make a purchase, here are a few questions to consider to decide whether it makes sense to buy now or wait:
1. How much will prices fall when they do? Based on the inventory and demand in our market, I don’t see prices falling more than 10%. I think we’ll see prices stabilize in the future and maybe drop by 3% to 5% depending on the area. However, I do see interest rates rising by 1% as the world and economy get stronger.
2. When is that price fall going to happen? Do you think it will happen in six months? 12 months? 18 months? It’s hard to be sure. And for that matter…
3. How high will prices be? If prices from today’s market rise 15% over the next 18 months and then begin to fall, they’re going to have to fall another 15% to get to a point where buyers feel like they’re getting the deal they’ve been waiting for.
4. How high will the interest rates be when the prices fall? Interest rates are much more likely to rise than prices are to fall, which is why I believe you’ll get a better deal buying a home now than you will in 12 to 24 months when the prices fall. In my opinion, many buyers are going to be paying more per month for a home they bought for less.
For sellers in the market, know that I haven’t seen a better time to sell a property than right now. If you’re waiting to liquidate your assets to take that money and do something else with it, you probably still have more time. The market is likely still going to appreciate, though there’s no guarantee—the election is coming up, unemployment is still high, and the pandemic is still active.
We don’t know for sure what the future is going to look like, but if you list your home now, you’ll almost certainly get a great price for it if you work with the right agent, price your home correctly, and improve its condition. You might get a little more for it in six months, but whether or not you should wait and see depends on your bigger-picture plans.
For those who are selling their homes in order to buy a new one, right now is the time to make it happen. Those low interest rates work in your favor, too, and they might not be around forever.
If you have any questions about buying or selling in our market, please reach out to us. We would love to explore your options with you and help you find success.