By Chad Meier, December 29, 2018
By Chad Meier, December 29, 2018
The housing market has settled down in many areas of the country. However, this in itself isn’t sufficient cause for alarm every time there’s a negative headline in the press. Artificially low mortgage rates coupled with inventory gluts and an economy that many perceived as sustainable caused home prices to skyrocket, and it was really only a matter of time before the market pendulum needed to swing back to a more normalized state. According to one recent analysis, national sales of existing homes are down 9.3% from one year ago and housing starts are down 8.7% from November of last year. But just because certain metrics are down, it doesn’t mean the market is on the verge of bursting. In fact, I would argue that a more neutral market is not only exactly what’s needed right now, but also makes for a healthy economy in the long term. A more level playing field also presents value opportunities for potential homebuyers (if they’re prepared to take initiative).
The Right Time Is The Right Time! No matter what state the housing market’s in, buying a home is a major economic decision for many people. Trying to time the market is an exercise in futility, so what matters most isn’t what the third-party indicators say. What truly matters is your current situation. Are your finances in order? Do you have significant debt to pay down? Do you have a job that ensures you can pay your monthly mortgage bill? Most importantly, do you have enough saved up in the event that hard times do fall upon us again? These are all things to consider before you endeavor to purchase a home. The right time to buy comes down to what you can afford despite fluctuating market conditions, and (maybe more importantly) what’s happening in your life.
How Long Are You Willing To Wait? Although prices aren’t climbing as they once were, those who continue to wait on the sidelines may be in for a rude awakening if they are waiting for the bottom to drop out. If you have the ability to purchase a home and the price is right, you must ask yourself a key question. Can you afford to wait even longer? After all, it’s widely understood that a 10% fluctuation in property value is roughly equal to a 1% change in mortgage interest rate, so by watching and waiting, your dream home could be sniffed out from under your nose just because you were hoping selling prices would come down a little bit more. Meanwhile…
What’s Happening With Mortgage Rates? Until the recent drama on Wall Street unfolded, they’d been bucking the downward trend for the past year. However, they’re currently down a bit, and are still historically low compared to what people have paid in years past. For example, mortgage rates hit a whopping 18.5% in the 1980’s. Today they are hovering around 5% (depending on type of loan). And while that’s a slight uptick from last year, it’s nowhere near as high as when our parents and grandparents were buying real estate.
The Bottom Line? Buying in a down market is something of a dance: Sellers want to sell at a price that works for them, and buyers want to capitalize on good deals for the same reason. Current conditions present opportunities for greater negotiability, so take advantage as long as you are in the right position.
p.s. Flipping Is Not Easy Money! Buying property in a down market may mean you are getting a better deal, but that won’t necessarily translate into making money on flipping that property. HGTV nation portrays home renovation as something of an easy win, but this is so rarely the case. Unless you are an expert in local zoning laws and have a bevy of trusted contractors at your disposal, renovations can be costly and time-consuming. Many times, you’ll be lucky to break even. If flipping is your passion, just keep in mind the goal of making money is not often realized as quickly as many reality TV shows would have you believe.