Answering this question wrong could cost you thousands.
Eric and I talk about a better question to ask on this episode of Utah Mortgage Post.
Over the past 20 years, a question that I get from all ages and generations is “Is now a good time to buy a home?”
This is a highly loaded question. With countless variables, how is it possible to even consider answering this question with a yes or no sentence?
If you were to ask that same question to anyone who bought a home in 2007 or 2008, then a vast majority may have expressed profound regret as the real estate crash bankrupted thousands of people. But, if that same question was posed TO THAT SAME block of buyers who held on to those homes for a decade or more, the answer would be dramatically different. “Yes! That was the perfect time to buy a home. Prices were cheap back then.”
The fact of the matter is this: prices and mortgage rates are what they are in any given market. To purchase a home, you’ll end up buying “what’s on the shelf” at that current time. Where the market goes after that no one truly knows.
Real estate, however, usually turns out to be a sound investment over time. Just like buying and holding a quality company’s stock, real estate, despite the short term ups and downs, generally has a good rate of appreciation.
Further, real estate with an associated mortgage, allows a buyer to only front a relatively small portion of cash (down payment) and yet still purchase the entire investment. Of course there is the associated interest and fees, but a buyer receives 100% OF THE ENTIRE APPRECIATED AMOUNT, not just gains on the down payment alone.
Now, where buyers can get into trouble is if they have too little invested up front in a depreciating market AND have to sell that home not long after purchasing. However, generally speaking, even that buyer can come out ahead if they figure out a way to hang on to the property and continue to make payments on time.
For real estate owners, time and inflation are actually on your side. Time usually gives appreciation, and inflation cheapens the price of the debt.
Further, a buyer may have the chance to refinance to a lower payment in the future, driving down the cost of ownership even more. “You marry the house, but you date the rate” is the popular saying of the day.
So, maybe the question: is now a good time to buy a home? isn’t truly the right question.
Perhaps a better question may be, “When do I plan on SELLING this home that I want to buy?”
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