Should you buy a home now, or wait?
Let’s face it; nobody wants to purchase a home at the peak of the market. And most buyers would love to imagine they got a good deal. But with today’s local market conditions, that’s a tall order to fill.
The internet has changed the way buyers search for homes. Gone are the days of buyers waiting for their REALTOR to call each week with the latest new listings. Today, buyers have more-or-less unfettered access to the Multiple Listing Service where agents cooperate by sharing their inventory of homes for sale.
There is a small selection of “off-market” or “Pocket Listings” which we discussed in an earlier article. How do you find these? For that, you still need a REALTOR.
The larger question is should you purchase a home today, or wait for more inventory or prices to decline?
This graph for San Mateo County illustrates that as of June 2013 we are still not back to historic high home values—though in select neighborhoods on the Peninsula we just recently surpassed previous historic highs.
Today’s buyers are snapping up homes with a frenzied sense of urgency—and they’re paying top dollar to do so. Why? Because interest rates are still very favorable and increase a buyer’s ability to pay over the seller’s asking price—but the trend is about to change and probably for good. We predict that in Q2 of 2014 mortgage interest rates will probably be a full point higher than they are today. And that’s not pure conjecture; the Federal Reserve has not only signaled they have overtly stated that when unemployment reaches 6.5% it will begin raising the federal funds rate—and they have already begun easing up on purchasing bonds to artificially keep rates low. In this article we discussed how much more one would pay interest over the life of a home loan when rates return to normal levels–and the numbers are staggering.
If the entire country’s housing market was rebounding at the same rate of homes on the Peninsula, one can easily see that the Fed would have already reacted and raised rates.
Buyers are locking in lower than historical trend rates and in most cases paying well over what a seller is asking for a home because money is cheap.
Have you been lulled into thinking these historic low rates will continue? Then take a moment to read this eye opening post we did back in March. Trying to save more money for a down payment at this point may be futile as home prices are escalating at a rate that the average buyer could never keep up with in monthly savings. Once interest rates begin to rise to normal historical levels, any perceived savings—even if the market cools off—will be quickly negated in interest higher payments.
We’ve been in business for over 20 years selling home on the Peninsula and we’ve experienced several recessions so the trends and cycles are obvious to us. Timing them is more difficult, but from everything we have seen, we believe it would be better in today’s environment to jump in and get a home today, rather than bet on more favorable conditions in the near future. If you are still sitting in the sidelines, you are betting against the odds—that unprecedented low interest rates will continue, and that home prices have already hit their peak and will soon decline. Barring any unforeseen catastrophe, that’s not a bet we would take right now.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 20 years experience in helping sellers and buyers in their community. They may be reached at (650) 508.1441.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.