Why Right Now Is The Best Time To Buy A Home
There's a major misconception right now with the real estate market. Much like everything else, this has to do with the media. Over the last three years we've heard nothing but the real estate market is HOT. BUY NOW. Interest rates are at historic lows! Best time ever to buy a home! All kinds of marketing dedicated to buyers buying and sellers refinancing.
The truth is the market was absolutely terrible for almost everyone. Unless you had a home to sell and you didn't have to buy another one, the market wasn't that great at all. The only truth to the last few years being a great time to buy was the interest rates. At their lowest point they got down to 2.5%, rates that I believe we will never see again, however that is only one part of buying a home.
According to NAR (National Association of Realtors) 70% of buyers who bought within the last three years have buyers remorse. The number one reason being that they felt they had to settle for a home they didn't love. Mainly because there were a ton of buyers and not much inventory to choose from. Buyers were also having to go way over asking price, and waive contingencies, including appraisal contingency, inspections etc. Right now there are a lot of buyers feeling the pain of this. Their bank accounts were wiped out from having to outbid everyone and now they don't have the funds to make the repairs needed, which they didn't know about because they weren't able to get the home inspected.
Poll Results
Recently I polled our database asking them what would hold them back purchasing a home in the next 12 months. Our database has about 8,000 people in it who all primarily came from Open Houses and Facebook buyer ads over the last three years, so they should be the best opinions on this. Below you'll see the top three responses we got from it. All of these are valid points and without the proper education on these i'm sure most would have these same concerns. So let's go over these top three concerns and see if we can come up with solutions for them.
1. Mortgage Rates
This is by far the most concerning reason for buyers, as it should be. For every percentage point the mortgage rates go up you lose 10% of your purchasing power. With the rates going from 2.5% in December of 2021 to almost 7.5% as of today (November 10,2022) buyers have lost 50% of their purchasing power. Basically this means the same home costs more money now. I see so many people not wanting to buy a home right now because rates are in the 7's and they're waiting for them to come down. I'm not sure why anyone thinks rates are going to come down. In my opinion Rates Are Going Up for a long time coming. I know a lot of people are kicking themselves for not buying when rates were in the 3's, 4's etc, but I think people will be kicking themselves for not buying in the 6's and 7's here in a few months. There's no reason to think rates are going to come down based on everything the government is telling us. Luckily we have a few options to combat these higher interest rates and still get you the ones you lost out on.
- Assumable Mortgages - FHA and VA loans are assumable, meaning you can take over the loan that the current owner has. Considering there were so many buyers over the last couple of years combined with almost every home owner refinancing, chances are they all have a much better rate than the current rates.
- New Construction - Back in 2008 during the great financial crisis builders had about 6 months of inventory on their hands and were freaking out trying to get rid of it. Today builders have 11 months of inventory. For those of you that don't know what that means, it basically means they have a ton of homes they need to get rid of and they're freaking out. Buying a new build is one of the best options out there right now, they'll do almost anything to get you in a home. They're offering lots of buyer concessions, including buying down your interest rate.
- Rate Buy Down - Not only are builders offering rate buy downs, but sellers are able to do this as well. It depends on what type of loan you have but you can get as much as 9% in seller concessions if you have a 20% down payment and are going with a conventional loan. This mean you can use 9% of the purchase price to buy down your rate, use towards closing costs etc.
- 10/15 Year Loans - There are several banks right now offering 4% interest rates on 10 year loans. I just had a buyer close on one this week that got a 4% rate. This may not be feasible for everyone but it is certainly worth looking into. The difference between your monthly mortgage amount on a 10/15 year loan versus a 30 year is probably smaller than you think. The only regret I have on buying my home last year is not going with a 10 or 15 year loan.
2. Economy
This would be the one i'm most worried about so I completely understand when others are. The state of our economy is very much in the air and it seems no one really knows whats going to come of it. Many people are afraid of buying a home because they're afraid the economy could collapse at any moment. That's a very legit concern and again, one that I have as well. As a Realtor i'm always looking to find out peoples objections, when it comes to buying and selling, and find solutions to those objections. With rising Mortgage Rate concerns we were able to do that, but with the economy concerns it was a little more challenging. That being said I believe we've found a great solution and we've already had several buyers win with it.
- Rent to Own - In my biased opinion I work with the best real estate coach on the planet. The reason I bring this up is because I can't take credit for coming up with this solution, as I had help from him. His team was hearing the same concerns about the economy issues from people so they went out to solve the issue and this is what they were able to come up with. The Rent To Own Program allows buyers to move into a home without the worry of a collapsing economy. How the program works is you pick out a home that you want, our investor buys it and rents it out to you. They only charge fair market rent for the area and you have the option to buy the home at anytime within five years. So say the economy collapses, you have no obligation to buy the home. And if the economy doesn't and home prices continue to rise, well then you have the option of buying it. The people we've put through this program love it.
3. Money
The amount of money needed to buy a home is probably the biggest Real Estate Myth there is. So many buyers still think you need 20% down to purchase a home. The truth is you only typically need 0-3% down to buy a home. Over the last few years I think the concern over money needed to buy a home has gotten worse. This is because buyers were having to go over appraisal value to buy homes and having to pay all closing costs. Don't let money be the reason you don't buy a home. One, there are several ways to get into a home without any money out of pocket and two, a mortgage payment is always going to be cheaper than a rent payment.
USDA Loans - This is my favorite type of loan and here in Missouri we have one of the largest USDA Programs available. These loans are 100% financing and a great way to get into a home with no money out of pocket. The last several of these that we have done we've been able to get the sellers to pay closing costs, which means you don't have any money out of pocket besides maybe your inspection costs.
Seller Concessions - Over the last few years seller concessions were essentially obsolete. Sellers had so many offers on their homes they didn't need or have to pay for these. Now that the market is calming down buyers are again able to ask for these in hopes of having the sellers pay. Generally this means the buyers closing costs
Inspections - Buyers still have to pay for inspections, if they want them done, but now not only are buyers able to do them again, but they can also ask for repairs to be done. Over the last few years it was very hard to win out on a home if you asked for inspection to be done, let alone ask for any repairs to be made. This will save you lots of money and overall you'll feel a lot more comfortable buying a home.