By Mandy Lunnon-Wier, Realtor, Lunnon Realty
You’ve heard us say it over, and over, and over, and over…if you are planning to buy your first house this year, NOW is the time to buy. Maybe you feel like this is just something that Realtors say, or maybe you think that we are just trying to sell you a house, but the reality is that in this market, it is important to buy something – anything – soon, and here’s why.
The most obvious reason that you should get in the market now rather than later is that home prices are increasing. We see this trend every year. Home prices start to inch up in January, they explode in the Spring, they increase at a slightly slower rate in the Summer, and they level off a bit in the Fall and Winter. So, shouldn’t you just wait until Fall or Winter to buy? NO. The prices level and perhaps even slightly decrease during that time, but they won’t come down to pre-Fall prices. Also, there is far less inventory in the Fall and Winter, so its more likely that you’ll be paying more for a home that meets less of your criteria.
The less talked about reason that you should buy now is that interest rates will (not might) increase this year. We’ve already experienced increasing interest rates in the first half of 2018, and industry experts expect that there will be at least a couple more rate hikes this year based on the federal reserve rate increase schedule. This means that if you have a set monthly budget to spend on your new mortgage, more of that will be spent paying interest on your loan instead of paying the principal balance and your buying power is dramatically decreased since you’ll be able to qualify for less of a loan than you could have when interest rates were lower. Coupled with the increasing home prices, we expect to see a large number of home buyers facing the harsh reality of being priced out of the market within the next several months.
Is concern about buying at the top of the market holding you back? Economists in the Denver area who are intimately familiar with our booming housing market have suggested (for many reasons) that we will continue to see surging home prices for the better part of the next decade, so if you buy now, you are buying at a higher point in the market than your neighbor who bought 3 years ago, but you’ll be in a better position than the neighbor who buys in 3 years.
Worried that you won’t find the perfect place since inventory is so low? Almost every first-time home buyer compromises on at least some of their wish list. But you can’t start earning equity in your home until you buy. While you may have to forego some must-haves in this home purchase, you are setting yourself up to be able to purchase a more long-term home that meets more of your criteria for your second home. Keep your eye on the prize – paying your own mortgage instead of rent to pay someone else’s – and you’re sure to find the place that will work for you now, and will be working toward your future, as well.
Here are two real-life examples of how these market conditions have impacted clients this year:
Client #1. We helped a young lady buy her first home in 2014. It wasn’t in the area she wanted and it lacked some pretty critical “must-haves” in her mind. But she bought something, even though it wasn’t perfect. Three years later, she sold that house and put her $100,000 profit into her dream home, with all the “must-haves” and in the location she wanted.
Client #2. We were working with a couple last year that was searching for a new home. They were very particular about the area and the features in the home. They wrote several offers, and were even able to get under contract a couple times. They spent money on inspections, and then backed out of each contract because of relatively minor inspection concerns. Ultimately, they didn’t find a suitable home before prices rose outside of their budget.
Which client would you like to be?
It’s not easy to buy right now, but with the guidance of your Realtor and their expertise in locating suitable properties and negotiating strong offers, it is possible to win in this market.