If you read or watch the news at all, you know that the housing market is one of the most talked about topics. Headlines are sensationalized, talking about the “impending doom” and ending in exclamation points. News sites are creating more and more clickbait to generate fear, doubt, and uncertainty from unclear messages. Guess what? The headlines are never going to let you know when it’s a great time to buy! They’re only going to let you know when that time has passed and you’ve already “missed out”.
But it doesn’t have to be this way!
Buying and selling your home is such a big decision, so it’s best to lean on a local real estate advisor! Would you rely on your electrician friend for medical advice? Would you call your daughter in Florida to ask about housing prices in Ohio? Of course you wouldn’t!
So let’s talk about some factors (and solutions!) that you should consider if you’re thinking about purchasing a home in the future: TIME and RATES.
TIME: How long do you plan to own the home?
We all remember the Great Recession in 2008. The median home price dropped from about $200k in 2008 to $166k in 2011 (National Association of Realtors, 2022). If you purchased a home in 2008, you probably panicked, thinking that you may have just made the worst purchase of your lifetime. Do you know how long it took for the median home price to get back up to pre-2008 prices? Only 5 years. If you purchased a home in 2011 when the median home price was at its lowest and still own that house today, chances are that it’s now worth DOUBLE what it was in 2011.
All of this information is to say this: the housing market goes in cycles. On average, however, home prices increase about 3% annually. That means if you’re planning on spending at least 3-5 years in the home, it truly doesn’t matter where we’re at in the cycle. No one can perfectly time a market–NO ONE. Perfect timing is luck, so why keep waiting?
Ask yourself this: If I don’t buy, am I willing to miss out on all the equity I could be building?
RATES: What about interest rates?
We all know the saying that “cash is king”. If you’re not one of the fortunate ones that has half a million bucks stashed away, interest rates are a concern to you. Did you know that the average annual mortgage rate in 1982 was 16.63%?! The historical average mortgage rate from 1990 to 2021 was a 5.97. Today’s rates are about 6.3-6.5%, which is just slightly higher than the 30-year average.
Why is an interest rate important? A general rule of thumb is this: if interest rates increase by 1%, it has the same effect as home prices rising by 10%. Since your budget probably won’t increase just because interest rates rose, that means you can afford 10% less home. Since interest rates have risen about 3% over the last 8 months, your $500,000 budget in April 2022 will now afford you a $350,000 home today (for the same monthly payment). That’s a BIG difference!
So what can I do to still buy the home I want?! Great question—don’t give up! In real estate, we like to remind our clients to “marry the home, date the rate”. Rates change every single day, and you can refinance in the future when rates go down. If you purchase that $500,000 home today at a 6.5% interest rate, your current mortgage would be $3160 per month. Let’s just say rates drop to 4% in two years. At that time, your monthly mortgage payment would lower to $2387. That’s about $800 you’re saving each month!!
I’ve got even more great news! Asheville’s Dream Team has an amazing relationship with a lender who has a “free-fi” program. If you use him as your lender when you purchase your home, he will waive the lending fees if you refinance within the first 3 years. That means you can lower your monthly mortgage payment at no cost to you when rates drop!
“Your next step is simple. You are the first domino.”
― Gary Keller, The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results
Want to chat some more? Give me at call or send me a text at (919) 880-9806, and I’d love to discuss the market with you! Knowledge is power, and I can’t wait to be your teammate through this process!
– Katie @ Asheville’s Dream Team