It's November 2022. Given the current national headlines one could think the real estate market has crashed and it is a terrible time to buy or sell property. The reality is not quite so bleak. You've probably heard the saying that "all real estate is local" and that has never been more true than right now. What does it mean? It means that whether real estate is doing well or poorly depends entirely on where you are looking or living. A dispassionate look at the current state of real estate shows that, although sold units have dropped in recent months due to higher rates, demand is still quite high for first time home buyers. Many markets, such as ours in Northern Colorado, still show an increase in home values.
What about national statistics that show home values are declining. This needs a bit of context. The market has just come off of a multi-year high where homes were commanding irrationally high prices. Having gotten in the habit of pricing homes on the high side, many sellers (and brokers) have not gotten the message yet that pricing has to be more in line with value than it used to be. As such, homes are still going on the market priced higher than they have a right to be. After a few weeks of no activity they are having to back off these unrealistic prices and thus, the area experiences a "price drop." Did prices of home values drop? No. If they had been priced properly in the first place, they would have simply sold at asking and that would have been that. In addition, some areas of the country (like California) experienced such explosive growth in home prices that they have dropped somewhat. But remember, a home that appreciated 100% and dropped 10% is still an appreciable net gain no matter how. you spin it.
Is it a terrible time to buy or sell? No but again, this needs some context. There is no question rates are up, but this has led the market to get creative in how home sellers can assist buyers to purchase homes. A popular option of late has been a 2 to 1, or 3 to 1 rate buy-down. Nothing particularly hard here, the seller concedes funds to the buyer to buy-down the rates for two or three years, after which rates go to what they originally would be. The idea behind this is rates will not stay static and in two or three years (or earlier) the homebuyer can refinance at future lower rates. But until then, they can still get into a home at an affordable payment. The upside is homes are still going up on value here in Colorado, so buying today locks you in on the home price at today's values, instead of waiting another year or two to buy when home prices are two years higher.
What about continuing to rent instead of buying a home in hopes of not borrowing at current rates? Well, consider this, buying a home today with a 30-year fixed loan is currently in the 6%+ for a 30 year fixed loan (as of 11/22/22). This comes with the ability to potentially write off the interest paid to reduce your tax burden. In the future, as rates drop, you can refinance, potentially reducing your monthly payment. On the other hand, instead of paying 6%+ to interest, rent is costing you 100% in lost funds and you have no write-off for taxes. Coupled with that, rental rates are unlikely to drop but rather, to go up. This alone should demonstrate that buying a home, even at today's rates, makes greater financial sense than renting if you are in a position to do so. Think of buying a home as "forced savings." The bulk of what you pay for the home goes back into the home. Over time, the home appreciates, you have tax benefits, and in the end when you sell, you get to withdraw your "forced savings" to spend elsewhere (such as another house). Sound good, then we can help.
If you would like to visit more about the possibilities that exist to get you into your own home, give us a call. No obligation, we are always happy to answer questions and offer guidance.
Kelley team, Neuhaus Real Estate, Inc.