Waiting To Buy

Waiting To Buy

Cost of Waiting

With the Real Estate Market beginning to shift a bit, we are now considered “Balanced”. This means that in most price ranges and areas, neither the seller nor the buyer has an advantage. Sellers who think they can still overprice will see there homes sit on the market longer…and, conversely, buyers who continue to wait may see prices come down a little bit. This brings up a great question: “Should I wait to buy a home?” Let’s tackle it…

Lower Demand = Lower Prices

Real Estate is no different than most other products…When demand dwindles, prices come down. That is where we are today…even though our supply is still lower than previous years. So, buyers should expect prices to level off, or in some cases come down a bit…not a huge amount, but they may come down 1-3%, in my opinion. With this knowledge, it seems to make sense to wait a bit longer to buy. But let’s take a look at other factors that come into play when buying a home.

Rising Interest Rates

Ever since the Market Crash in 2007, the FED (Federal Reserve) has kept our interest rates artificially low, to help stimulate the economy…this includes Real Estate. Buyers have gotten really comfortable with the low rates, and even though there have been threats of raising rates over the years they pretty much stayed the same. Now, however, those threats are coming true. In 2018, alone, we saw several small rate increases…and we have been told by the FED to expect more in 2019. Analysts predict the rate will rise to around 5.2% in 2019. What does this mean? Your money will not go as far tomorrow, as it will today. Your purchasing power will shrink.

Adding It All Up

When prices come down, buyers think they are winning…However, it’s an artificial win, because of the higher interest rate on their mortgage loan. In essence, their monthly payment may be very similar tomorrow, as it would be today…BUT more of their payment will be going toward interest instead of principle. Something else to consider, when this happens, is the amount of equity a buyer will build up over time. Because of paying more to interest each month, it will take longer to build up equity. Check this out: If you buy a home today, with rates that are still low, and you want to sell your home in 8 years, you will have more equity built up than if you had waited to buy your home and had to deal with higher interest rates…basically it’s a double hit to your finances.

I hope all of this makes sense. If you have questions about this topic, please give me a call: (949) 929-2270 or shoot me an email: Ron@RonEvansRealty.com…You can also contact us here.