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Is Now the Right Time to Buy A Home? - Deciphering the Real Estate Question We All Ask

Updated: Oct 30, 2023

One of the most frequent questions I encounter in real estate is, "Is now a good time to buy?" Let's dive into that, with some clarity and simplicity:

Is Now The Right Time To Buy A Home?

For Prospective Homeowners:

Let's start with the basics: Are you looking for a place to call home genuinely? Do you see yourself enjoying the Austin landscape for at least the next three years? If that sounds like you, it's best to consider long-term living benefits over short-term market changes.




For Investment Seekers:

For those looking to invest, think about the long game. Can you envision holding onto a property for 5-10 years? While the current interest rates might give one pause, it's worth noting that house prices are echoing those seen in 2021. If you're patient and eyeing potential growth around 2024 or 2025, there might be promising opportunities awaiting.




Reflecting on Recent Years:

Taking a step back to 2020-2021, when interest rates were attractively low -- many were keen to jump into property ownership, even bidding much higher than home value to secure a property. Was it a misstep? Not necessarily, especially for those who didn’t need to sell in 2023. Securing a 3% rate on an appreciating property for 30 years has undeniable merits. However, today's landscape has advantages as well, especially the ability to negotiate lower home prices now and lower interest rates later.

If you want to compare buying a home now vs then, we have an appreciation what-if tool -- we are happy to share this, free of charge!

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Buying in 2020-2021

Buying Now

Tons of competition

Less competition

Bidding wars --> homes selling above value

Ability to negotiate --> with the right realtor, you can save thousands on your home purchase

Low interest rates

Higher interest rates

Not a high chance of decreasing interest rate

--> less ability for a lower monthly payment in the future

Higher chance of decreasing interest rate

--> higher chance of a lower monthly payment in the future

Comparing To Today's Landscape:

Although interest rates have climbed, there's an upside: lower property prices and less competition. Basically, if you buy now, with the right realtor, you'll be able to negotiate a lower price point. Compare this to 2020, when even below-optimal properties had bidding wars.


Not only will you be able to negotiate property prices now, but you could also negotiate interest rates in the future.


For buyers in 2020-2021, there was a slim chance that rates would fall below 3%. What they got is likely what they'll get. For a buyer now, with interest rates at 7.25%, the probability of interest rates decreasing are much higher.


If interest rates do go down, it opens up the option to refinance in the future, lowering your monthly mortgage payment.


Let’s do a real-world example:

A buyer purchased a $600,000 home today at a 7.2% interest rate.

  • Payment is likely just around $4,475/month.

  • Likely to negotiate a much better price than they could have if they had purchased at in the peak of early 2022.

If you think there is a 50/50 chance of rates going down, then perhaps you can refinance in the future.


If you think rates may drop to 5.75%

  • Your payment would be at approximately $4,018.

  • ~$5,400/year savings with a refinance in the future - that's more than a month's payment!




Controlling Your Sale's Timing:

One golden piece of advice: Real estate shines as a long-term venture.


It’s pivotal to ensure you dictate when you sell. By doing so, you can align your sale with favorable market conditions, optimizing your return on investment.


The Three-Year Guideline:

A quick tip: If possible, try to avoid selling within three years of your purchase. Given typical appreciation rates, selling earlier might not yield the expected return.


Wrapping Up:

Whether you're searching for a family home or your next investment, understand that you will never be able to pick the top or the bottom in real estate. Too many people think that this is possible. This isn’t likely in the stock market and it isn’t likely in real estate either.


Make the best decision you can at the moment and know that real estate tends to be very forgiving as an investment over the long term.


Always consult an investment professional for investment advice. This is not investment advice.


More Info:


Whether you buy now or never, we love being your resource!

Jen


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