November 16, 2022
Why Now is a Good Time to Buy a Home
With news of inflation, hiked interest rates, and record home prices, one might wonder if now is the right time to buy a home. Here are a five facts to consider:
1. Real Estate is Leveling Off. Inflation may be affecting many commodities but there’s considerable evidence that the real estate market peaked earlier this year and home prices are now falling nationwide, with softening in Boise. The good news for homeowners is that, although Boise was one of the big winners the last two years, homeowners who are investing in real estate have discovered that Boise still remains one of the best places to invest as values have not corrected as steeply as other west coast markets. As prices soften overall circumstances start shifting to a buyer’s market where the prospective buyer gains more leverage in influencing the terms of the sale.
2. New Home’s are Discounted. Homebuilders are now sitting on excess new home inventory that are currently being sold at “rock bottom” prices, even with upgraded amenities. Demand has softened but supply is strong. This is a sweet spot situation for prospective buyers seeking a brand new home with warranty and upscale amenities. There is a general “zero-start” situation across most of the Treasure Valley. That is, many builders will not initiate further construction of new homes until existing inventory is reduced. Once construction commences [likely in spring of 2023], prices will begin to go up and options will be streamlined to focus on more basic features and amenities.
3. Home Ownership Beats Renting. Yes, home ownership can be expensive but it still outperforms renting. As mortgage interest rates and property taxes fluctuate some may be tempted to wait out the market and just rent.
This is certainly understandable for a time, especially if one is strategizing a purchase by saving for a down payment, but be careful of trying to time the market. It’s possible that the Federal Reserve may begin to reduce its pace of interest rate hikes (which indirectly affect mortgage rates) but most experts do not expect an actual downturn in rates for considerable time, and few expect to see the record low rates of 2020/21 ever again. Moreover, if interest rates give one pause just remember that, if you’re renting, you’re essentially paying your landlord’s mortgage, plus expenses. The advantage of home ownership is that you build your own equity and are at least able to write off the mortgage interest as a tax deduction (your landlord is doing this!). If interest rates are a concern, consider the value of a larger downpayment at closing, which can reduce the interest liability of your home investment.
4. Lending Solutions are Creative. Because the home buying pace has slowed due to rising interest rates, lenders are now accessing a broader set of tools to fund home loans, often in more creative ways to attract and benefit the homebuyer. For instance, lenders are often not requiring 20% down as a hard and fast rule.
5. Real Estate is Still a Wise Investment. As local and global markets strive to adapt to constantly evolving market conditions and consumer demand, over time real estate still remains one of the wisest investment strategies. A combination of finite resources, population growth, and inevitable increases in demand continue to make real estate a sound place to invest for the long haul with home values steadily rising over time.
In the end, the decision to purchase a home is both personal and substantial. It’s important to weigh all of the factors in the interest of making the best decision for you and your family’s future.
Idaho Bliss Realty Partners