949.359.5100Should I Buy A Home Now?
We could even ask the question “Should I relocate now?”. If the question was as simple as should I buy a home now, and you didn’t own a home, the answer would almost always be yes, buy a home! Everyone needs home equity to be built over time.
One of the worst things renters can encounter is a kind landlord who does not increase rents with the market. Do you want to know why this is the case? Because kind landlords may cause you to never purchase a home, and never have the desire, and never gain equity in a home. It’s way too reasonable of a rent to bother trying to purchase your own home. Many times though when that kind landlord passes and new family members take over, with none of the same emotional links and more of a business mind set, you may find yourself years out of what could have been you making massive headway towards complete home ownership, mortgage free.
That being said, with interest rates being high and home prices remaining high, maybe for the next year or two it won’t kill you to rent. But while you do continue to rent, make sure and squirrel away money for a down payment.
What about those of you wanting to retire and relocate, to possibly a tax free or low tax state, aka Nevada Texas Arizona, etc. Let me tell you a story, based entirely on true facts.
A Tale of Two Interests –
Back in 1999 my new bride and I were living in South Philly and renting. After 2 years of that renting business my wife pushed for us to purchase our first home. We were married at that point for over 4 years, and I am so glad Angie was vaulting us into home ownership.
The application business side was typically mine to handle, and this time was no different. We had applied with WSFS Bank in Wilmington DE, and the rate was 6.75%. This was typical in 2002 20 years ago, so no one was complaining. Remember the mortgage market was so hot then and effected the housing markets a lot. I did not fully understand the mortgage process, and had a few questions. My lender was not communicative at all, just matter of fact, you do this and do that and we will do you a favor by getting you a loan. I got no return phone calls until finally the day prior to closing I got him on the phone. I tried understanding by asking questions but he was impatient and rude. When the conversation ended I wondered why I was doing business with him.
I walked into a client and related the story. He asked me if I had ever bought a home before, and I said no. He asked me again, for sure, is this your first home purchase? I said yes, first time. He said that there was a first time home buyer rate being offered thru Chase, and all you had to do was sit thru a Sat morning educational seminar. And the rate was 5.5%. Guess what we did, we sat thru the Sat session and got the new rate, Angie having morning sickness and all with our second son on the way. We were thrilled to have a 5.5% rate on a 30 year mortgage.
I guess the moral of the story is, we got spoiled since the Financial Crisis of 2008. In fact, rates slowly fell from the time we bought our first home in 2002, and didn’t truly rise until late 2022. That’s a 20 year run. Normal mortgage rates have always been around 5% or greater, but the last 2 decades simply spoiled us. Maybe we have to come back to the new reality. My wife keeps saying that when rates do soften up a bit, then home prices will not come down. Why, because all those buyers have been waiting on the sidelines for a more reasonable rate, and when they move to sell and buy a new home, the home prices will stay inflated. Supply and demand.
It’s a dog eat dog world out there. One school of thought is that if you are going to buy a home now, at this high rate, you can always refinance in 18-24 months at a lower rate. Does it cost to refinance, yes it sure does, but allow the math to dictate whether or not it’s worth your time to refinance. I had 2 mortgage brokers that I referred clients and many many others to. I am so glad I did, as they were sitting at 4-6% interest rates, and many refinanced at 2.5% and even lower. I feel satisfied that for no profit to myself at all, many families were helped to save massively on their mortgages. Crazy low rates I know. But we won’t see those rates again. Reminds me of what my dad told us 6 kids in the ‘70s when the Steelers won 4 Super Bowls and the Pirates 2 World Series. You’ll never see this again kids, so enjoy it.
Do you know that both of these mortgage brokers not once encouraged me to refinance, since we are at 3.375% fixed for a 15 year mortgage. They both said the same thing, by the time we refinanced on a 15 year, and paid the refinance fee, it wasn’t worth the change. How’s that for honesty!
So we are back to the original question, should you buy a home now or wait. I know all about it, some of you do not want to give up your super low mortgage even if the relocation state saves you in taxes and expenses. An idea, maybe rent your present home for a while, while relocating and renting in the new state. This does come with it’s own set of issues, as tenants could be problematic, not paying in a timely manor, or trashing your home. But it is one idea. Perhaps be patient and observe what is happening to interest rates and the housing market. California I believe is slightly inflated, so it may come down in prices. This means if you’re waiting to sell, it could affect your sales price in CA to a much larger degree than the state you may be relocating to. In other words, your home in Cali could be at 1 million now, but come down to 900K, while the home in AZ could be at 500K, and come down to 450K. Food for thought.
I will tell you that since the Fed said they will not be cutting rates this Summer, the last 3 weeks have seen loan rates increase by .75%. That’s a lot when they were in the 6’s and now capped across 7% yet again.
Hope this exchange will help you with an open conversation about selling and buying in the near and not to near future.
Happy Hunting!
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