Lately, I've been hearing some people argue that now is not a good time to buy a house. Even Clark Howard advised someone on his radio show the other day to keep renting rather than to invest in a home. I understand the reasons why someone would argue that now is not a good time to buy, which I will get into in a moment, but to suggest that it is better to pay someone else to live in the home they own rather than to own your own home is downright wrong.
But Let Me Play Devil's Advocate
Home prices have been rising at a quick and steady pace since the recession ended and according to experts they will continue to rise another 3% in many metropolitan cities over the next year. Here in Atlanta, according to the S&P Core Logic Case-Shiller Home Price Index, we have seen home prices rise at least 5% each year since 2014. Along with home prices, interest rates are continuing to rise and show no signs that they will dip anytime soon as the economy is booming. Inventory is very low in many major markets, including Atlanta, which helps to contribute to the increase in home prices. We have been experiencing around a 3 month supply in metro Atlanta, meaning on average a listed home will sell in 3 months. This represents a seller's market, while conversely a 6 month supply or higher represents a buyer's market. Clearly, when you consider all of these factors buyers are much better off waiting to buy a home until it's a buyer's market again, right? Wrong.
Why Waiting Could Hurt You
Is it the absolute BEST time to buy a home? No, but it is certainly still a GREAT time to buy and here is why. With the rise in interest rates, home prices have to flatten out at some point, meaning although prices will still increase over the next year they will do so at a slower pace. One could argue that it would be smart to wait until prices do flatten out but they would be wrong. You know why? That's right...interest rates! Rates are still historically low, but they are expected to continue to tick up over the next year. According to CNBC, the Fed is widely expected to approve another increase in September. Let me illustrate how an increase in rates affects prospective buyers' purchasing power. A 1% increase could reduce purchasing power by as much as 11%, meaning a buyer who would be able to afford a $300,000 home at 4.5% interest can now only afford a $267,000 home if interest rates increase by 1% to 5.5%. Even just a .5% increase could reduce a buyer's purchasing power by 4-5%. These seamingly small percentages can be mean big losses for those buyers who decide to wait. Although it may seem like housing is unaffordable now, wait until interest rates increase again.
Some Encouraging Words
As I mentioned before, home prices are forecasted to increase about 3% next year which means those who buy now will see their home values appreciate. Those who buy now will also be able to take advantage of interest rates lower than we will likely see anytime in the near future. This is great news and especially important for first-time homebuyers who are thinking about continuing to rent. Now is the time to make moves before you are financially unable to afford what you want. For those of you who already own a home and are thinking about selling but don't want to "buy high", I have the same message for you.
My Recent Experience
My husband and I had been living in our house in West Midtown for 3 years and really had no reason to move until my husband found this really awesome house in Sandy Springs. I knew that we would be able to sell quickly and that the equity we had accumulated in just 3 short years was pretty outstanding, but was it the right to time to sell and was it the right time to buy?? Ultimately, we realized it was. We knew that although we might be able to sell in a year or so for a little bit more, the prices of the homes we would be looking at would be higher too, along with those pesky interest rates. On the other hand we thought maybe we should stay put for 3-5 more years and wait to see what happens with the market/economy. The discussion just always kept coming back to interest rates and we were afraid that we may not be able to afford exactly what we wanted if we waited, so we put our house on the market. We had a contract in less than 24 hours over our asking price, so we immediately put a contract on the new house and closed them both a couple of months ago. We couldn't be happier with our decision and with our interest rate! We've already seen the value in our new home increase in just a couple of months and we feel secure knowing that we can comfortably stay here through many economic cycles.
Putting It All Together
Now may not be the most ideal time to buy, but it is without a doubt still a great time to buy and may be the best time that we will experience in the foreseeable future. Of course it all comes down to what is best for your personal situation. If you're thinking about buying, we're here to help guide you and provide you with the best information so you can do what's right for you. Call us anytime!