Should home seekers buy a home now? Is this season a good time to buy? What’s going to happen with the real estate market next year? What effect, if any, will a new president have on housing in general? What about interest rates? Will they finally start going up or down even further?
These are the same questions every real estate agent hears on a daily basis when talking with potential buyers. Depending on who the real estate agent is, their level of expertise, their understanding of the local market conditions, how closely they follow and understand the economic indicators that affect the housing market and perhaps most importantly what guides their moral compass, a buyer is likely to get many different answers to the same question.
The long and short of it, there really are only two good times to buy real estate – five years ago and today. Since it’s not possible to go back in time, homebuyers should focus of what they can control, which is the present, today.
First, homebuyers should ask themselves three questions, because only they can determine if the right time to buy is now.
First, do they want to buy a home?
Next, are they in a financial position to buy a home?
Last, is their credit profile sound enough to qualify for a loan?
Answer “no” to any one of these simple, basic questions, and the homebuyer may as well start reading another column because they’ll never buy a home as long as the answer to any of them remains “no.” However, if they can answer “yes” to all three questions, then consider the next points.
Homes are affordable. While they are not at the lowest point they’ve been in the last 10 years, they are still obtainable for most buyers. Consider that homebuyers can still buy an existing home for less than it would cost to build it new.
Interest rates are low. Rates are the lowest they have ever been. I remember in 1981, interest rates for the best borrowers were at 18 percent and some paid as much as 21 percent for a home loan. Depending on what report people read and what data is analyzed, average mortgage rates today are in the 4 percent range.
Rates are expected to rise. It’s true that a year ago many predicted that 2017 was going to be a boom year for real estate, and while prices have gone up, big increases never materialized. A year ago, many were predicting that interest rates could climb to 6 percent by this time. With that being said, the Mortgage Bankers Association is currently projecting that interest rates for a home loan a year from now will rise slightly into the 4 percent range.
It is easier to qualify. The inside joke among real estate agents and loan officers use to be that as long as an applicant could fog a mirror they qualified for a loan. Well, it will never be that easy again. After the collapse of the economy, the pendulum swung to the other extreme making it nearly impossible for any but the most qualified individuals to obtain a home loan. Today, requirements are beginning to loosen up some as the pendulum starts its journey back again. Both FICO credit score and loan-to-value standards have recently been relaxed.
First Time Buyer Programs are available. A first-time buyer can qualify for a Federal Housing Administration loan with only 3.5 percent down and a 620 FICO credit score. There are other programs that come and go to assist first-time homebuyers with down payments – some are outright grants.
There are fewer holiday competitors in the marketplace between October and January than any other time of the year for a number of reasons. Regardless of the reason, less competition means homebuyers are less likely to compete with other buyers for the same home. Sellers are typically motivated, otherwise they would be waiting for the spring selling season. Motivated sellers often negotiate a better price or make other concessions.
Frustration in the market makes it a good time to buy. There have been a lot of people waiting to get back in the market. Millions of families who lost their home to either a short sale or a foreclosure are now starting to re-enter the real estate market, after waiting a mandatory minimum three years before being able to qualify for a loan. These buyers are being called “Boomerang Buyers” and typically qualify for any first-time buyer program being offered.
The other frustrated buyer is the young professional of the millennial generation who moved back with their parents after graduating college because of the uncertainty of the entire economy. They have saved money for a home and are ready to get out on their own and buy their first home.
With more qualified buyers entering the market as potential buyers, a bidding war scenario is very likely which will drive up purchase prices.
Lastly, owning beats renting. Owning a home has always been and always will be a large part of the American Dream. In most markets, including in the Temecula-Murrieta Valley, owning a home makes financial sense. Not only are there tax benefits to be had from consulting a professional tax specialist, but there is the potential equity that will accumulate over the life of the home. And of course, it’s all about the pride of ownership.
Call (951) 296-8887 and get the information needed to make an educated decision.
For questions regarding available inventory and/or other real estate matters, please contact [email protected] Mike Mason, Broker/Owner of MASON Real Estate Cal. BRE: 01483044, Temecula Valley resident for 30+ years, Board of Director (since 2011) Southwest Riverside County Association of Realtors.