Here’s what buyers need to know about the state of our market.
Is this a bad time to buy? I was working with a buyer the other day who sent me a Facebook post claiming it was a bad time to buy for a variety of reasons. Real estate is never a one-size-fits-all business, so today I want to go over every point in the post and talk about our market for buyers in general:
1. Homes are overpriced. Whether or not a home is overpriced is a matter of perspective. You are certainly paying a premium for a home, but to a lot of buyers, it’s worth the cost.
2. PMI is high in our current market. This one is true, but is it a dealbreaker? The real question is what will your monthly payment look like, and with low interest rates, you can lock in a great rate.
3. Interest rates are fake because they are front-loaded in your loan. I’m not sure I would call the rates fake, but it is true that lenders tend to save the principle for the end of your loan. So if you have a 30-year mortgage, you’ll probably pay off all the interest in the first 10 years.
This all sounds pretty bad, but let me give you some counterpoints:
First, It doesn’t matter if you buy now or later — lenders won’t change how they set their loans. So if you’re waiting for a time when you don’t have to pay interest upfront, it will probably never come. Also, you can always make extra payments earlier in the life of your loan. We always recommend our buyers do this to decrease the overall cost of their mortgage.
Second, If you stay within your comfort zone, you won’t be overleveraged. You don’t need to worry about PMI as long as you budget correctly and have a good grasp of your situation. This is part of the reason why talking to a lender is so important. They’ll let you know exactly what your situation is.
Now that I’ve addressed some of the negative critiques, I want to offer you some positive reasons why now is still a good time to buy:
1. Renting is a waste of money. Mortgages are almost always lower than rents. You’re paying to live somewhere anyway, so you might as well take advantage of appreciation while you’re at it.
2. Homeownership builds equity over time. The market is expected to be good for a while, so this is a great opportunity to increase your net worth.
3. There are huge tax benefits to homeownership.
4. You will always pay interest upfront. Once again, if you are waiting for the magical time when lenders will forgo this practice, it isn’t coming.
5. Prices will not fall anytime soon. Our market continues to be hot, and there are no signs of a crash. If you are waiting for prices to drop, you could be waiting for a very long time.
6. Homeowners almost always have a higher net worth than renters. This is just common sense. When you rent, you can’t take advantage of appreciation.
There are endless numbers of reasons to buy a home, but I’ll stop things there. At the end of the day, the benefits of homeownership are too good to pass up, so if you are looking to buy, please call me. My team and I are always willing to help.