As I was doing my daily research of current market conditions, I came across the article in Trulia. As many of you know, this is one of the top sites for anything real estate related. As I read it, I realized that most of it applies to our market on Maui right now. That is not always true with mainland trends, but these are true here and now. Enjoy the short read and then call me!
To rent or to buy; what used to be a givenâ€”that you would buy a home as soon as you could afford toâ€”has become an agonizing conundrum for many a would-be home buyer, in the face of the housing marketâ€™s big bust, and super-slow recovery. Low prices seem to create a wide-open window of opportunity, but they also create the concern that prices will keep falling after closing, and that catch-22 has hundreds of thousands of buyers-to-be stuck on the fence.
Fortunately, there are a handful of life, mortgage, and local market signals which indicate that the time *might* be right to hopâ€”scratch thatâ€”leap off the fence, and into home ownership:
1. Mortgage rates are going up. Home prices have been low for the last several years, and in fact, are currently looking like theyâ€™re heading back down to the same levels they were at the depths of the real estate recession. During this same time frame, interest rates have also been lowâ€”this one-two punch has created record-high affordability for the last four years running, causing buyers to believe that this window of opportunity wonâ€™t be closing anytime soon.
While prices donâ€™t look like theyâ€™ll be skyrocketing anytime soon, interest rates are another story. Rates have been on a roller coaster over the past few months, and with inflation and Fed rates set to spike later this year, todayâ€™s low interest rates might be as good as theyâ€™re going to get for a long time to come, and I mean a very long timeâ€”in the next few years, governmental intervention in the mortgage markets is likely to wind down, and that means higher mortgage interest rates are not only inevitable, theyâ€™ll probably be here for a long, long time.
Mortgage rates on the rise are one signal that now might be the peak of home affordability, and the peak of the opportunity to buy.
2. Rents are going up. Rental rates in many areas are also on the rise. (This is very true here on Maui, I have spoken to a number of property managers and they are having a hard time finding places for families to rent.)â€”in fact, the foreclosure crisis has created additional demand on many marketsâ€™ rental housing inventory in several different ways.
First, former homeowners who lost homes to foreclosure now need to rent; as well, buyers in foreclosure hot spots have been hesitant to buy, many electing to stay renters far beyond when they would have otherwise. On top of all that, super-tight lending guidelines have stopped even some who would like to buy homes from doing so. As a result, rental homes are in high demandâ€”and rents are rising.
Rising rents at a time when the prices of homes for sale are low and, in some places, falling? One more signal that now might just be the time to buy. (Of course, where foreclosures are high, the chances of continued depreciation are, tooâ€”to offset this risk, have a long-term plan, to minimize the possibility that youâ€™ll owe more than your home is worth when you need to sell. Read on for more on how to plan for the long term and minimize your home buying risk.)
3. Your income and career are stable for the foreseeable future. The smartest home buyers look to their lives, not just the market, for signals about when the time is right to buy. Home buying is a long, long-term endeavor these days. The goal is to be able to commit to staying in the same place, geographically-speaking, for 7 to 10 years before you buy (more in a foreclosure-riddled market, less in an area that has been more recession-resistant).
Most lenders will require that youâ€™ve been at your jobâ€”or in the same general field of workâ€”for at least two years before you buy, but thatâ€™s the bare minimumâ€”beyond that, you donâ€™t want to be barely beginning a career in which you think you may need to move sooner than that, nor do you want to buy when youâ€™re advanced in your career, but in an industry which is dying, or downsizing the workforce in your region (unless you have a strong Plan B).
When you get to the spot in your career where you can realistically project a stable income 7 to 10 years out, life might be giving you a green light to move forward on your home buying dreams.
4. You can reasonably predict the home youâ€™ll need in the years to come. Since successful home ownership requires that you be ready to be in the place for a good number of years, best practice is not just to buy a home with the space and number of rooms you need right nowâ€”rather, you should aim to buy the home youâ€™ll need 5, 7, or even 10 years down the road (to the best of your ability to predict, of course).
You might be a newlywed with no kids now, but you plan to have them in a few years, or maybe youâ€™re a newly minted “empty nester” right now, but can project that youâ€™ll want to retireâ€”and might not want to climb two flights of stairs to get to and from your bedroomâ€”10 years down the road. Before you buy, you should be in a position to buy the home that meets your future needsâ€”not just your current ones; and that requires that you have a reasonable idea of your life vision and plan for the future.
If youâ€™re able to predictâ€”and afford, at todayâ€™s pricesâ€”a home with the space, amenity, and geographic location youâ€™ll need 7 to 10 years from now, you might be in a good phase of life to get off the rent versus buy fence.
With that said…buying a home is a massive decision and includes multiple, long-term financial and lifestyle obligations, so if one or more of these signals are present for you, that doesnâ€™t mean you have the green light to run out and buy a home tomorrowâ€”rather, itâ€™s a good sign you should begin down that path, if youâ€™re so inclined.
Youâ€™ll still need to do the work to make sure your personal finances and holistic life picture are also in alignment before you buy, as well of the work it takes to ensure that your real estate and mortgage decisions are sustainable and smart, over the long-term.
Itâ€™s not overkill to check in with a mortgage pro, a tax pro, or ME and a financial planner to make sure all your ducksâ€”not just oneâ€”are in a row before you make your move.
I am happy to walk you through the steps of buying from afar. We handle those situations everyday. Let me help and inform you.