Philip: 0:00

Welcome to the first time home buyers podcast by lone pros. Today . I want to talk about whether now is a good time to buy a home. I'm Phil Mastroianni and I'm a licensed mortgage loan originator as well as a licensed real estate agent. If you're thinking, is now a good time to buy a home? It's important to consider a number of factors. These include your current financial situation, employment stability, and future plans. The market conditions themselves may not be as important as you think. But I do want to talk a little bit about the current market conditions. As of this recording in November of 2022, we're moving into a cooler, more buyers market where there's less competitions on homes, But a lot of that is driven by the rapid price increases of the last two years, along with a large increase in mortgage interest rates, which has made it difficult to purchase a home. What I ultimately want you to take away from this today is that the market shouldn't dictate when you buy. It's something to consider, but your financial situation and budget should determine it more. When is good time to buy home If you have a stable job and income, you've saved up for a down payment, and you're ready to commit to a longterm mortgage. You really do need that stable job and income because it's a long-term commitment and it's important to be sure that you can afford to make those monthly mortgage payments. It's also important to have saved up for a down payment As this will help you get a lower interest rate on your mortgage and give you more flexibility in the type of loans you can qualify for as well as have equity already built into your home. That just gives you some flexibility. Finally, if you're ready to commit to a longterm mortgage now may be the time to buy a home. On the other hand, you may want to wait to purchase a home if you're not sure about your job security. You don't have enough saved up for a down payment. You aren't confident that you'll be living in the same area for more than two years or your lifestyle's going to be changing. For example, getting married, having kids retiring that may require you to upsize or downsize your home. Really quickly after purchasing. That's just not something you want to do. Ultimately the decision of whether or not you buy a home is a personal one. You'll want to carefully consider your own circumstances before making a decision. The other factor that I talked about earlier is market conditions. If you're thinking of buying a home, you really want to be paying attention to market conditions. Are the prices rising? Are they falling? Is the market hot? Is it cold? These factors can impact your decision of whether or not now is a good time to buy a home. And also possibly the type of home you're going to buy. Let's talk about buying a home in a hot market, typically called a sellers market. This is characterized by low inventory, high prices and lots of competition in this market. It may be difficult to find a home that meets your needs and budget. You may also end up paying more for your home than you would in a cooler market. Does that mean it's a bad time to buy? Not necessarily. Let's break it Low inventory means you have less options to choose from. This means you may need to get a little out of your comfort zone. This is from either a price or a physical standpoint. You may need to look at slightly higher priced homes to find what you're looking for, or look at homes that are under your budget, but will have an over ask price to be competitive. Nobody wants to overpay for a home, but real estate is one of those few assets that consistently appreciate over time. An average home appreciates between three to 6% annually. And when we look at average home price index appreciation from 1975 to 2014, which was one of the larger stats that I was able to pull California homes appreciated at 6.77% annually, Colorado at 5.25% Florida 4.09%. Georgia at 3.49% North Carolina at 4.06%. New York at 5.57% and Virginia, a 4.92% to just give some general examples across the country. What this is really saying is that you can realistically overpay by 3% or more and expect to see that made up within the first year or two. And in some areas within the first six months of home ownership. With lower inventory. You may need to look for home that isn't quite turnkey. You may need to remove the requirement for things like a pool or a remodeled kitchen. Look at things in a home that you can't change. And make sure those are your base requirements. Things like location, number of bedrooms and bathrooms, and lot size are all much harder to change than things like paint, colors, appliances, or even the types of countertops in your kitchen. Think long term. You can work on a major project each year, start with the kitchen, then maybe the backyard, the following year, given this flexibility, you can often time your projects to be worked on during off seasons. When contractors have more time and often give homeowners a discount. It's also a great time to roll up your sleeves, do some of the work yourself to save some money. Another option is to put yourself on a longer time plan and use the equity in your home to do a complete remodel, consider a home equity line of credit or HELOC, which allows you to draw money as you need it. And usually comes with lower interest rates than many other types of loans. This particular program pulls money directly from your home's equity. And you can use that to do all of your upgrades and remodeling this, lets your home equity, do the work for you. Now let's take into buying in a cooler market or buyer's market. This is typically characterized by higher inventory, lower prices and less competition. In this type of market, you'll have more options to choose from and may be able to find a home that better meets your needs and budget. If you're considering buying in a cooler market, there are still some things to keep in mind first, while prices may be lower, they may not stay that way for long. It's important to have a realistic idea of what you can afford and to consult with a real estate professional, to get an idea of how much home you can realistically expect to get for your budget. With higher inventories, you do have a lot more options, but it's important to still be decisive and not get caught up in the paralysis of analysis. It can be easy to get caught up in looking at too many homes and never making a decision. But it's important to remember that the longer you take to make a decision, the more the market can change. It's better to stay within your budget and look for home that meets as many of your requirements as possible. If you see prices dropping in general, it's very important to have an agent that understands the current conditions and can guide you in the proper offer amount. You can only get a loan for the amount that home appraises for. So it's important to make sure you aren't overpaying. Even if prices in the area are dropping. As new homes are sold at lower prices, the value of your home will technically drop. So make sure to move quickly on your offers and getting appraisals done as soon as possible. This helps ensure that the offer price and the appraisal price lineup, and you can be confident in the transaction. Not every seller's willing to lower the price. If an appraisal comes low, and you don't want to have to come out of pocket to cover the difference, especially in a cooler market with prices already dropping. The question then comes up with, should I keep waiting for prices to drop more? It really depends on your personal circumstances, but in general, if you see home that meets your needs. It may be best to go ahead and make an offer in a cooler market. There's less competition. So you may not have to worry about multiple offers driving up the price. It's also important to remember that while prices may be dropping in general. They may not drop in a specific neighborhood or type of home you're looking for. So if you find a home that you love and it's within your budget, it may be best to go ahead and make an offer rather than risk waiting too long and missing out on that dream home. As we can see from the 30 plus years of real estate price, history, homes do not decline and in price for long and over the long term, have a more than 3% average appreciation annually. The last note to consider. Is what your payment will be looking like in the future. If you're currently renting, you can expect your rent to increase anywhere from one to 5% each year. So far in the last 20 years, the national median rent has increased at an annual rate of 4.17%. Year over year rent changes have not fallen to a negative rate since 1934, almost a hundred years ago. So you shouldn't expect your rent to ever drop or even stay the same from lease to lease. Your mortgage payment never changes for the lifetime of your loan on a fixed rate mortgage. The principal and interest are never going to change on a standard loan, but the insurance and taxes can change depending on your location. And then also you might have HOA dues consider this as just part of your long-term planning. How much easier would it be if you were paying the same rent as you did 15 years ago, would you be able to save up for things like vacations remodeling or even retirement? And once you've paid your home off in 30 years, all you have left to pay is taxes, insurance and possibly HOA dues. So in summary, it's best to be financially ready to buy a home. And the market doesn't need to dictate whether or not it's a good time to buy there's pros and cons to any market, but in the end, It really depends on your personal circumstances. If you're looking to buy home, don't let the market scare you off because honestly, nobody can time the market just like you can't time. The stock market. When you're ready, the time is right. Don't put off buying because the market isn't perfect because it will never be. I hope this has helped make you a more informed home buyer.