Ken's brother sent us this article from The Atlantic this week as he thought it might be one our clients would find interesting. Thanks, Mike!
The article's title is "When Will Be a Good Time to Buy a House." For buyers who are in the market now who are thinking hard about market conditions and wondering about when home prices might go down (I think that is all buyers at this point!), this article has some really good points. We recommend reading the article, but if you are short on time, you can read on below for the bullet points.
Here is the gist:
- Homes have been selling for higher prices and more quickly than in years past. According to the article "From late 2020 to late 2021, American home prices increased an average of 17.5 percent—more than twice as much as in a typical year during the 2010s. (In some places, such as Boise, Idaho, and Austin, Texas, prices went up more than 30 percent.)"
- From 2019 to 2021, the median number of days a home was on the market dropped from 51 to 24.
- Buyers haven't been able to find much relief by broadening their search because these market conditions exist in much of the country. As buyers on the Front Range know, there really isn't anywhere within driving distance in which these market conditions differ.
- Buyers are left to wonder, should I jump in now or wait for the market to slow.
- Housing supply remains low as home building has slowed, Baby Boomers are staying in their homes for longer, and Millennials (a really large generation) are in their prime buying years. According to the article, Freddie Mac "has estimated that at the end of 2020, the country was some 3.8 million homes short of meeting the demand of both buyers and renters.
- Due to these housing supply issues (along with COVID-related supply chain issues exacerbating things) the author of this article writes "the experts I spoke with recently didn’t expect that prices would stop climbing anytime soon, though they did expect prices to climb less steeply in 2022."
- One thing that could dampen the market is a steep rise in interest rates.
- According to the author, "If you could magically choose what the market is like when you buy a house, you’d maximize your wealth and minimize your stress by picking a time when prices are low and going to shoot up in the future, when interest rates are low, and when you don’t have to make a rushed decision or enter a bidding war. The competitiveness of today’s market means that now is not that magical moment. But realistically, identifying the perfect time to buy is impossible because perfect timing is clear only in retrospect."
- According to Chris Herbert, the managing director of Harvard’s Joint Center for Housing Studies "You ought to be making this as a housing decision and not an investment decision,” he said. If you’re buying a house, he advised, it should be because you want to live in it for at least five years, and ideally many more—which also will mean that even if prices fluctuate, you have a better chance of your investment appreciating over time."
- Waiting for the market to settle down isn't likely to help you- but that doesn't mean you should get swept up in the frenzy. The author's opinion is it's better to insist on the usual contingencies (like home inspections, appraisals, and having loan contingency deadlines) and if some buyers are willing to forgo those, that doesn't mean that you should, too.
- Postponing a purchase has its risks as well. Waiting could mean a higher purchase price down the road.
- "The point remains that, in the moment, you can’t know when will be the best time. So set that strategizing aside and try not to think about it—if you buy a house and stay there for a while, you’ll be better positioned to ride out whatever wildness the future holds."
Ken and I agree with the premise of this article which is that you'll never know how to time the market exactly right. However, if you have a long-term plan for your home, you'll likely do well enough. Buyers should make their home purchase at a time when it makes financial sense for them and they should plan on staying in (or holding as a rental) their home for at least 5 years. If these two things are in alignment, buying a home this year probably makes a lot of sense.
Wondering how you can win in a seller's market? Read our blog here.
Until next time!
Allison Benham and Ken Crifasi with K&A Properties