Should I wait to buy a house?

[browning2480]

Low interest rates.

But wouldn’t the higher prices off set the low rates? I really have no idea. Just thinking out loud

 

[CorbLand]

But wouldn’t the higher prices off set the low rates? I really have no idea. Just thinking out loud

Short term yes but not as much long term.

Just ran the numbers. My wife and I got preapproved back in March of 2021. Interest rate then was 2.9%. We have been trying to get a house for year and last week our interest rate was 4.5%.

To compare, the total cost of buying a house on a 30 year (I took out PMI, insurance, and taxes. Also assumed 0 down.) roughly between the two interest rates are as follows.

460,000 house @ 2.9 = Total cost of 689300. (rounded)
378,000 house @ 4.5 = total cost of 689500. (rounded)

 

[WRM]

Some of it's just the Lemming principle/effect hot in action. My mom (and a whole lot of the rest of the country) had a mortgage at 18% when they were trying to fix the wreck Carter made of the economy.

The fed guvmint can't let the residential housing market stall. It's the main driver of the overall economy. Once it's in the crapper, the real trouble starts. But, they about out of buttons to push and levers to pull.

 

[String&stick]

Things will slow. . . The problem right now is available inventory. Everyone took their houses off the market during the pandemic or they got bought because there were limited options. We should be on the tail end of that this spring/summer. As interest rates climb, we will see more hesitation around buying. This should allow more inventory to hit the market. If houses start to sit for 30-60 days instead of 2 days. It will help increase options and start seeing some decreases to asking price.

5% on the 30 year today, and it's going to keep going up. Not only will you price out first time buyers, you'll start to price out first time traders moving up to a bigger home. This will put the brakes on a big section of the market.

Also who the hell knows what's going to happen if the fed actually increases another 2% this year. A whole lot of investment properties owned by medium sized investors are held on 5/1 or 7/1 ARMs because a lot of banks won't do long term fixed for small to mid sized investments. If your sitting on a 3.5 rate and it rolls to 7 people may start selling some property to clear their debt. Again adding more inventory to the market.

Also the FED has a bad habit of over correcting so they very well could jerk the steering wheel and turn what would have been a bouncy ride through the ditch into a 6 revolution rollover! Only time will tell

 

[PNW bow hunter]

This has been an interesting thread to read and participate in. I wonder what the OP ended up doing? Hopefully he purchased a home back then. Prices have gone up substantially, and rates have gone up substantially as well since this was started. I’m only 42, bought my first house when I was 20. Long term it was the best thing I ever did.

One thing I have always noticed with real estate, is a majority of people will always tell you it’s the wrong time to buy. If prices are high, you’ll be told it can’t go higher. If prices go down, people will tell you they will go down more.

For a personal home it seems like NOW is always a good time to buy as long as it’s affordable for you, and you can see yourself living there 10 years from now.

I’m my area the prices seem out of whack for buying investment property at the moment. A house yiu can rent out for $2500 per month costs around $650,000. Not a very appealing investment to me currently.

 

[grossklw]

Institutional investors also have access to loan programs that normal people do not. There are some loan program that are amortized at even 40 years. I've seen some programs that are 40 years interest only, which is kind of madness to me.

The commercial lending side of things with the 5 and 7 year locks with ARM's or balloons are the norm. I've refinanced the lions share of my portfolio into 7 and 10 year lock's. Most long term investors have done the same, I'm absorbed from some interest rate shock for the next few years, but you may be on to something with people considering selling some of their inventory as either that ARM or balloon comes due.

For personal home I wouldn't even think twice about it. If you know you're going to be somewhere long term buy it now. Even with an increase in interest rates we're still at historical lows if you look at the last 40 years. You can always refi down later if they drop, but I could see primary's hitting 6-7% by the end of the year. Commercial notes are already flirting with 6 right now.

 

[Johnboy]

I wonder what the OP ended up doing? Hopefully he purchased a home back then. Prices have gone up substantially, and rates have gone up substantially as well since this was started.

Still homeless and regretting it. Made one offer and passed up a few other opportunities waiting for a better fit that never came. Same houses are now out of my league. If I was trigger-shy two years ago, I'm not feeling any better about it now. At this point I don't have much of a plan. Very frustrating, and frankly discouraging.

 

[Gman12]

I am no expert but the market is crazy now. I have talked to many people recently who have told me that sellers are receiving multiple offers within a few days of listing all of which are full price plus several thousand more dollars added on top. This is unsustainable and will not last much longer IMO. I believe that the hyperinflation we are experiencing along with many other factors will send us into a recession very soon. I also believe we are looking at a situation with the housing market similar to 2008 where the market peaked and then dropped like a brick. I, personally, would not dare buy a house right now if at all possible. I think the market will peak very soon and prices will drop significantly over the next 12-18 months.

 

[TCUHunter34]

Here’s my take on it from someone in this space daily.

Influx of people equals increase of demand. The shortage has a lot to do with decrease in homes built post 2008, the supply shortage is showing itself now.

Interest rates have helped people who typically couldn’t afford a home buy real estate. People tend to base their decision off monthly payments, not overall cost.

Couple this with free money from the government, and value of the dollar decreasing. Home prices will likely continue, with a correction, before heading farther north (barring economic destruction from Brandon). If the value of $1.00 now is $0.80 within a few years, you’ll be paying more for the same home regardless of if the real estate market goes up. The market could stay stagnant and $1.00 spent on real estate now will be worth $1.25, $1.50 and higher later on purely due to inflation.

Why would the hedge funds be buying so frantically right now if they thought prices would go down? They don’t care about the price today and will overspend, because they know where it’s going in 5-10 years. They know where home prices are going and where rent is going.

 

[CorbLand]

Still homeless and regretting it. Made one offer and passed up a few other opportunities waiting for a better fit that never came. Same houses are now out of my league. If I was trigger-shy two years ago, I'm not feeling any better about it now. At this point I don't have much of a plan. Very frustrating, and frankly discouraging.

You are not alone.

 

[68Plexi]

Still homeless and regretting it. Made one offer and passed up a few other opportunities waiting for a better fit that never came. Same houses are now out of my league. If I was trigger-shy two years ago, I'm not feeling any better about it now. At this point I don't have much of a plan. Very frustrating, and frankly discouraging.

Feel for you man. It took my wife and I seven years of looking, planning financing and down payment options, putting in offers and being outbid every time before we bought. I think we put offers in on at least 7 homes before we found a house no one else bid on.


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[arock]

Short term yes but not as much long term.

Just ran the numbers. My wife and I got preapproved back in March of 2021. Interest rate then was 2.9%. We have been trying to get a house for year and last week our interest rate was 4.5%.

To compare, the total cost of buying a house on a 30 year (I took out PMI, insurance, and taxes. Also assumed 0 down.) roughly between the two interest rates are as follows.

460,000 house @ 2.9 = Total cost of 689300. (rounded)
378,000 house @ 4.5 = total cost of 689500. (rounded)

Not an insignificant amount and why I can't believe the skyrocketing will last. There is only so many dollars that can be paid per month and with the cost of literally everything else going up it just isn't sustainable.

 

[arock]

This has been an interesting thread to read and participate in. I wonder what the OP ended up doing? Hopefully he purchased a home back then. Prices have gone up substantially, and rates have gone up substantially as well since this was started. I’m only 42, bought my first house when I was 20. Long term it was the best thing I ever did.

One thing I have always noticed with real estate, is a majority of people will always tell you it’s the wrong time to buy. If prices are high, you’ll be told it can’t go higher. If prices go down, people will tell you they will go down more.

For a personal home it seems like NOW is always a good time to buy as long as it’s affordable for you, and you can see yourself living there 10 years from now.

I’m my area the prices seem out of whack for buying investment property at the moment. A house yiu can rent out for $2500 per month costs around $650,000. Not a very appealing investment to me currently.

The right time to buy is when you can. Same thing with the stock market. May see some immediate retraction or loss and ups and downs but over the long term is going to appreciate.

 

[CorbLand]

Not an insignificant amount and why I can't believe the skyrocketing will last. There is only so many dollars that can be paid per month and with the cost of literally everything else going up it just isn't sustainable.

I am a dumbass so do not believe anything I say as fact or gospel.

One of two things is going to happen in the foreseeable future.

If companies continue or raise wages to meet the needs, these prices will hold and this will be what it is.

If companies do not raise wages to meet needs, this will break and correct to some new base level.

 

[tdhanses]

Still homeless and regretting it. Made one offer and passed up a few other opportunities waiting for a better fit that never came. Same houses are now out of my league. If I was trigger-shy two years ago, I'm not feeling any better about it now. At this point I don't have much of a plan. Very frustrating, and frankly discouraging.

Have you considered buying raw land and building a small home to start with, down the road you can expand.

Personally I would look for a great piece of raw land and start small vs buying what is currently what you would want in a home.

 

[thinhorn_AK]

I feel like I got my house just in time, closed at 2.9% fixed rate back in August. Also I don't feel like we overpaid for what we got. Somehow I was able to avoid a bidding war by getting in touch with the people several months before they were actually moving.

 

[Johnboy]

Have you considered buying raw land and building a small home to start with, down the road you can expand.

Personally I would look for a great piece of raw land and start small vs buying what is currently what you would want in a home.

I priced out a new home last year and concluded that it was even further out of my range. You can't build anything close to decent around here (SE WI) for less than $200/sq-ft, and that's without the land to build it on (or permitting, or driveway, or landscaping, or.... or... or.... etc, ad nauseum).

 

[IdahoHntr]

A lot of talk on here about the financial investment of a home, but as someone who bought a house summer of last year, there is more to think about than just the financial investment. Of course everybody wants to time it perfect and buy a home at the best time so that it is of the best financial benefit, but getting lost in that is the reason why most people are wanting to buy a home in the first place. You want a place to call HOME, a place to live that is yours.

Of course the financial investment of a home is huge and should be approached with that in mind, but that doesn't mean that is the only factor. Buying a home simply made my life better. My life is more enjoyable every day because I have a home. Will my house lose some value when/if the market crashes in the near future? Yeah. Most likely. Does that mean it wasn't worth it? No! At least for me. My home is more than a financial investment. My whole family is happier and why wouldn't that be worth the risk of losing some money? I can make money other places. Just keep it simple, payments within your budget, and don't play the "What if?" game. Find something your happy with and buy it. If it doesn't work, buy the next one. We put offers in on several homes before finding ours. It happens.

Last note, if you are willing to stay in a home for 5-10 years, there have been very few times and locations in history that you actually lose money on that home. Especially when you compare it to renting where you are guaranteed to lose that money every single month. Just a thought.

 

[Joshaaron91685]

My opinion, anyone who “knows” what’s going to happen is a fool. Your skepticism should correlate to their confidence. We’re selling our house and renting for a bit to see what happens. I’m not saying that’s the right thing for everyone but it’s the right thing for us. We need a larger home and we have access to a rental for about half the going rate. Crossing my fingers it’s the right move.

 

[go_deep]

This is the only way I can see a pull back in home prices.
Large economic pull back, people can only afford food, their own home, utilities, basic everyday living expenses, vacations are cut out of the budget. The hundreds of thousands of homes bought up to be used as Airbnb's, VRBO's, and whatever weekly rentals don't get rented, the mortgage on that property doesn't get paid, so the people that own them start to sell them in groves flooding the market with homes. Not an '08 fire sale, just enough to turn it into a buyers market and being pricing in those areas back in check for awhile.