A friend asked me this yesterday, and this is such a great question! The short answer is that it is almost ALWAYS a good time to invest in residential real estate. Here’s why now is a particularly good time to purchase, especially if you are renting.
1. Interest rates are incredibly low. Why does that matter? Because it allows a buyer to borrow more money but keep the payments the same. For example: Borrowing $250,000 at a 3%interest rate has the same principal and interest payment as borrowing $185,000 at 6%. TIP: when money is so inexpensive to borrow, get a 30 year fixed rate mortgage. Yes, this strategy takes longer to build equity, but hopefully property values will appreciate while you are paying the note down.
2. Rental rates are high, and still increasing. Why let someone else make money off of you? You build no equity in a rental situation!
3. There is NO better way to build generational wealth than through homeownership. Maybe your strategy is to BUY and HOLD- either live there forever, pass down to an heir, or keep as a rental property. Maybe your strategy is to enjoy the home with your family for as long as you live in this city- most likely paying down principal and home appreciation will offset closing costs paid at the time of purchase.
4. Mortgage interest is still tax deductible.
5. Build your social network! Enjoy making friends in your neighborhood! Homeowners stay longer than tenants, don’t overlook the social aspect of neighborhood living.
6. Appreciation- historically speaking, property values for single family residential property have continually increased. Although you can’t count on appreciation continuing at obscene rates like 2021, steady appreciation over time builds equity.
Let’s do it! Quick tips for buying in a hot market!
1. Expand your purchase criteria! Keep “location, location, location” in mind but be open to different locations or school districts. Move some of your “must have” features to your “wants” list.
2. Spend your money on the house, not on HOA fees. While homeowner’s associations usually add value to a neighborhood by requiring homeowners to maintain yards and be consistent with other general maintenance items, buyers on a tight budget need to be wary of extra fees over and above principal, interest, taxes and insurance- commonly referred to as “PITI”.
3. How handy are you? Know your strengths and weaknesses! If you aren’t handy, make sure to buy a home below your budget so you have reserves to spend on repairs and maintenance. Or, stick with a newer home. If you are handy, consider buying a home that needs some TLC and grow your property value through sweat equity.
Bottom line- buying beats renting! Make sure to surround yourself with experienced real estate and mortgage professionals who will evaluate your unique situation and help you make the best decision!
Cheers to homeownership! Tori