Should I Buy a Home Now or Wait? | Huntsville, AL Real Estate
Should I buy a home now or later? Whether you're renting a home, whether you're expanding your family, whether you're looking to invest or buy that dream home; there's a lot of mixed information out in the marketplace right now that’s causing confusion on home purchasing decisions.
Why You Should Wait
Home affordability continues to drop. It's dropped 45 points in the last two years from 155 down to 110. Buyers have been faced with this double whammy of rising interest rates, along with rising prices as well. The other thing is there's a lot of fear of a recession in the market and with that potential job losses that might come. Those are all valid reasons for why to consider waiting.
Why You Should Buy Now
1. We have only had one major real estate correction in the last 100 years. That was back in 2008 and that wasn't even a real estate crash, it was a financial crash. The challenge we’re experiencing is that since 2008, builders have slowed down the rate of building new homes which has created a 5.5 million home deficit.
2. Housing prices are not going to crash since we have a record amount of homeowner equity in this market right now at $9.9 trillion. Borrowers that are buying homes right now are more qualified. Back in 2008, the average loan to value ratio was 85% which means they had very little equity if there was a dip in the market. Now the average buyer actually has a 55% loan to value ratio which gives them tons of equity going into the purchase of their new home.
3. We're experiencing record inflation since 40% of the US dollars have been printed in the last 24 months. One of the best hedges against inflation is buying hard assets such as real estate.
Take a look at this graph, it charts monetary supply versus home values in America. You'll see back in 2008 there was a huge gap between the monetary supply and the home prices, which is why home prices went down in 2008. Now, those two numbers line up perfectly and the reason for that is we're not really having housing appreciation. It's more of just dollar devaluation in the market right now.
Buy a Home Now or Wait?
This is an opportunity to buy a home in a less competitive market. As inflation continues to go up and interest rates are rising, there's less demand in the marketplace. You want to go ahead and do that because we have a 5.5 million home deficit in this country that’s not going away. Buy a home now when there's less competition, lock in your price, and then refinance as rates likely go lower in the next 12 to 24 months.
The challenge with waiting to buy a house is we're seeing record rent appreciation right now and your rent is likely going to continue to increase over the next couple of years. As interest rates dip potentially over the next 12 to 24 months, new buyers are going to enter the marketplace which will increase the demand and in my opinion, produce bidding wars again, because we have that five and a half million home deficit across this country.
Buy or wait? Personally, that's going to be a decision up to you. However, I am personally buying in this market.
Posted by Matt Curtis on