Should You Wait for the Housing Market to Crash to Buy or Sell a Home?
Why 2022 is the right time to be active in the Real Estate market
By Laura Wehnes
Over the last few years, I have had many people tell me, “I sold my house so I can get a great return and now I am renting to wait for the housing prices to go down,” or, “My parents told me to rent for another year for prices to go down,” or, “Laura, I want to invest in Real Estate once the market goes down.”
In my 17 years in Real Estate, I have experienced extreme sellers markets, extreme buyers markets, a market crash, and all of the challenges in between. During all of these times, people have been taken advantage of with buying and selling Real Estate. The main reason people have found success is learning the market, sticking to their strategies, and having an expert help navigate the every changing environment.
While many people have already decided to wait to be active in Real Estate, 2022 should be the year you’re active in the Real Estate market. Whether you are considering buying a home, selling a home, or investing in Real Estate, here are some insights to inform your decision and why you shouldn’t wait any longer.
The pricing question: Why are prices so high and when will they go down?
While the overall housing prices are expected to continue increasing this year, they are not projected to increase as exponentially as they have in the last few years. Rising house prices are coming from a supply shortage and demand increase. Several factors are contributing to that are...
New construction builds
To maintain demand, there needs to be about 1 million new builds a year. We have been operating at a deficit of about 300,000 builds for nearly ten years in the U.S.
Seniors aging in place
Because of the increase of baby boomers aging, the cost of health care rising, and options for people to stay in their homes longer, many people are choosing to stay in place. People choosing to stay longer in their homes has also contributed to the supply chain shortage. And, as we know, a decrease in supply leads to an increase in pricing.
The largest group of millennial birth years
We are in the middle of a five-year period where the largest group of millennials is hitting the average first-time homebuyer age of 30. This is contributing to an increase in demand for Real Estate. Millennials are looking forward to beginning to build their wealth and are eager to purchase their first home.
Interest Rates Interest rate risk is a factor that people tend to overlook when they are deciding whether to make a move. But as interest rates continue to creep up, you should know the dirty truth about them. A one percent increase in interest rates affects your buying power by ten percent. What does that mean, exactly? For example, if you can afford a $200,000 home and the interest rate increases by only one percent, you can now only afford a $160,000 home. The likelihood of a home decreasing in value from $200,000 to $160,000 is extremely rare. Historical data from the National Association of Realtors tells us that this is so uncommon that it has only happened twice -- once during the Great Depression and once during the Great Recession.
All of this being said, the average interest rate over the past 40-year trend is six percent, according to data from the National Association of Realtors. Take advantage of this inexpensive money while you can!
Renting Let’s say you are currently comfortable in your rental but are worried about finding a home. You don’t know when to start the process, where your down payment will come from, or if you will even qualify to buy a home.
These are all common feelings for renters as they decide on the right time to start their Real Estate journey by purchasing their first home. If you're unsure if buying a home makes sense for your personal situation, you need a buyer’s consultation. In a buyer’s consultation, you should receive information on the home buying process, including what steps you need to take for your situation. Here are a couple of helpful tips to help you get started.
The first thing you will want to do is contact a trusted lender to find out what you can afford. They will help you go through your finances, including your income and your bills. Then will talk to you about a payment that you are comfortable with. If you are concerned about a down payment, there are options for that as well. You can put down as little as 0.5% with a down payment assistance program.
Did you know that, oftentimes, you can purchase a home for the same as your rent payment or maybe even less? Now is the time to consider buying a home and building equity for yourself instead of someone else. Or, if you are even more financially savvy, you could consider purchasing a multifamily property where someone else will help you grow your equity and pay your mortgage.
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Before you consider investing your money in real estate, you should determine what your goals are for your investment properties. Do you want to flip them? Do you want to hold them as long-term rentals or short-term rentals? In any case, real estate opportunities are available in any market. When it comes to real estate investment, we will work with you to determine your goals and specific needs for a property. We make sure you have the tools you need to make a decision when the right opportunity comes your way.
Although purchasing a home can seem like an overwhelming decision, 2022 can be your year to start building your wealth or growing your Real Estate portfolio. Knowing the market, your goals, and working with a professional can help make you more confident in your decisions. As real estate professionals, we have become experts in helping our clients navigate the decision process by studying the market on a daily basis, understanding real estate trends, being avid learners of the economy, being active investors in the Real Estate industry, and time in the market.
If you are considering buying, selling, or investing in Real Estate, we can help you build your goals and start to educate you on how to make expert Real Estate decisions that help you build your life and your wealth.