Is now a good time to buy a house or is it better to wait?

Lately, many people ask us, is now a good time to buy a house? With the Federal Reserve’s recent interest rate hikes, people want to know whether they should buy a house now or wait until interest rates go back down. If you are thinking about buying a house, but you are unsure whether now is a good time to do so, you are not alone.

As always, deciding when to buy a house depends on your time horizon and your goals with the specific property.

Here we will answer the question and discuss how to buy a house in our current real estate market:

1. Consider Your Timeline

At some point, you have probably heard the saying “Location. Location. Location.” with reference to real estate. While location definitely does matter, it is also true that “timing is everything.”  When determining whether now is a good time to buy a house, it is important to consider your time horizon.

If you are looking to purchase a home as a 2-3 year investment, then we do not recommend that you buy a house right now. For short-term moves, it is better to rent in this climate. Monitor the market and see what happens over the next 2 years.

If you plan to live in your home for at least 3 years or more, it definitely makes sense to buy a house now. This is especially true for families who will live in the house for 5-10 years.

There will be some good deals over the next six months that didn’t exist during the pandemic. The types of deals that will save you money, compared to what you would have paid these last 2 years.

2. Buy A House. Buy Smart.

If you want or need to buy a house now, be smart about it. Now is not the time to get into bidding wars over properties. Make your offer. If the sellers accept it, great. If not, it’s time to move on to the next property.

Look for a good deal. We help our clients find good deals, such as houses with cosmetic needs that other people overlook. A house that needs new carpeting and fresh paint requires a little extra effort but can save you money in the long run with a lower purchase price. If the house needs work, we will try to low-ball the asking price, get a good deal, and build “sweat equity” by fixing it up.

Additionally, the buyers who couldn’t get a home inspection through for the last 2 years are now able to do buy a house their way. Now, you can know what you are buying and retain your appraisal contingency, You won’t have to make a quick decision either. You will be able to sleep on it, and come back the next day with an offer. These opportunities for buyers did not exist over the past 2 years.

Buy now. Lock in a good price. Then, we need to get creative on the finance side.

3.  Get Creative With Financing

Once you’ve got a house under contract, it’s time to get smart about financing options. Most lenders are forecasting mortgage rates to come back down to more affordable levels, stabilizing and normalizing by 2024-2025. With this, buyers have 2 options to finance their homes in a prudent way, given the current climate.

The first option is an adjustable rate mortgage. With an adjustable rate mortgage, you can lock in a lower rate, thereby reducing your monthly payment for a short period of time, 3-10 years depending on the program you choose. Then the rate adjusts after that period to whatever the rate is at that time. The theory is that you can refinance to a 30 year fixed mortgage rate in a couple years when the rates come back down.

The second option (another variable strategy) is to take advantage of what’s called a 2/1 buy-down. If the interest rate is 6.5% today, you pay a fee (and hopefully get the seller to cover the cost). Then, the lender will give you a rate that is 2 points lower than today’s rate for 1 year. The second year is 1 point lower, and the third year is back to whatever is today’s rate.

For example, the interest rate will be 4.5% in year 1, 5.5% in year 2, and 6.5% by year 3. Three years from now, the rates are forecasted to come back, and then you can hopefully refinance to a 30 year fixed rate below today’s interest rate.

4. Keep Perspective

It’s important to keep perspective throughout the buying process. Remember, owning still beats renting a home, if your time horizon is greater than 3 years. The benefits of owning include paying down the principal, building equity into your home, and gaining property appreciation. Additionally, you get access to tax write-offs when you own your own property. Renting only benefits one person, your landlord, as you are paying off their mortgage instead of yours!

Finally, keep in mind the location of our market. In this case, location really does matter. Historically, the Metro DC market has held up well compared to other cities during times of recession. Our region has a robust economy. People are always moving here for jobs, and those people need places to live.

If you are interested in buying a home, contact Jack Goodwyn jack@rockwoodhomesdmv.com and Brittany Floyd brittany@rockwoodhomesdmv.com or call 571-623-0956. We will be your real estate experts and support you throughout the home buying process. Learn more.