3 Reasons Why It's a Great Time to Buy a Home
Here are the three reasons why I believe right now is a great time to buy a house, and why I personally just bought a home in this current housing market. Everybody's worried about, oh my gosh, interest rates have gone up. Oh my gosh, homes are on the market longer. Oh my gosh, we're in a recession.
Great. Let me answer all three of those things real fast, and then I'll tell you the three reasons why, and they very much correlate, it's a great time to buy a home. Number one, we're in a recession. Absolutely. We're in a recession, but did you know that historically speaking housing performs in the positive during a recession? How can that be?
Just think about it. There are two things that everybody needs to live. They need food and water and they need a place to live. They need shelter, right? If nothing else, you can cut out a lot of things. You can cut out your Netflix subscription, your Starbucks habit, and your frivolous trips to target. You can cut those things out. What you can't cut out is a place for your family to live. You always need a home.
Homes typically perform well and appreciate during a recession. So yeah, we're in a recession, but we still need a place to live. Just because we're in a recession does not necessitate that the housing market crash, let alone go down at all. Historically speaking, when most recessions happen, housing prices go up. And I believe the reason why is because of the reasons we just discussed.
The other thing people say is, oh my gosh, interest rates have gone up. Absolutely. They have. Do you realize how ridiculously low-interest rates have been over the last two or three years?
I mean, for crying out loud, we saw interest rates in the 2% range. Very common in the 3% range. That's unprecedented! That's unheard of. Did you not think that interest rates would go up? Just because interest rates go up does not, therefore, necessitate a crash in the market or that the market is in bad shape. I might argue that the fact that interest rates have been so low, to a degree, artificially inflated values because it allowed people to purchase homes at a higher price point because the interest rate was so low that they typically wouldn't have purchased before. Not that that's a bad thing for them individually, but when you look at the health of the market as a whole, that has some consequences, prices were driven up.
So now when interest rates start to normalize and come back to really good interest rates in the fives, which are still fantastic, by the way, interest rates in the fives, they're not terrible. That's a really good interest rate in the fives. In the fives. Now they come back to the fives and all of a sudden that increases the monthly payment amount.
So then that makes it look like the housing market is overextended itself. And a lot of it, when it comes to the payments, is shock value to people because anybody that was looking for a home on interest rates that were at 3%; They're now looking at the same priced home and the new interest rate and they're going, oh my goodness, that's a whole lot more per month to my payment. Yeah, because of perspective and what they're looking at, when you look at the market as a whole, where interest rates are, interest rates are still great. Even though they're higher than they were The rates increasing have helped with this problem that buyer's have had the last two years.
If you were a buyer the last two years and you gave up, it was most likely because every home that you were interested in had multiple offers on it and sold for well over the asking price, typically to somebody that came in with a bunch of extra cash and waived all of their contingencies and did really crazy things because the scarcity of not being able to get a place because there were so few homes for sale. If you didn't make an offer immediately in some ridiculous way, you weren't going to get the house. Many people over the last couple of years just gave up because they couldn't win. Even when they were giving up their firstborn child, they couldn't win. So they backed out of the real estate game and got out of it. Maybe that was you.
Interest rates were so low, there were so few homes on the market because they were selling so fast that if you didn't get your offer in the first 72 hours of it going on the market, most likely it was going to be pending and you missed out on it.
Homes are sitting on the market longer. You know what? Instead of them going off the market in seven to ten days, they're now on the market for 30 days. Oh man, 30 days on the market. The real estate market is crashing, right?
No. In a good healthy market, you typically have what we call months of inventory, three to six months worth of inventory. The homes now take 30 to 90 days to sell. That's called a normal and healthy real estate market. There's no reason to panic. There's no reason to freak out. Interest rates are still good.
Yeah. Homes are sitting longer, but as a buyer that gives you more opportunity. That means you have more choices. You have options that you haven't had in the last two years. So if you gave up the last couple of years, you have more choices now.
You know, houses are sitting on the market longer, we're in a recession, and interest rates are up. When you look at all three of those things, all three of those things are true. And that's not a bad thing for you as a buyer. Those can be good things for you when it comes to being a buyer.
The Housing Market Isn't Crashing
First of all the market, isn't going to crash. How do I know that? Well, I don't have a crystal ball and it's possible that it could crash, but there's zero data to indicate that it will crash. When you look at the homes for sale, yeah, we've increased the number of homes for sale on the market.
So our supply has increased, but you know what it's increased to we're now at what we call the pre-pandemic levels of inventory. And that was still a super low inventory. So yes, even though inventory has doubled, it needs to go up about 10 X before we normalize. So yes, inventory is up, but it's still not anywhere near where it needs to be in the market.
Isn't going to crash when you have high demand and you still have low inventory. Yes. It's double the inventory we had before, but it's still low inventory. If you're really hungry. Right. You're hungry. And you want some chips and there's only one chip and it doubles the two chips. Are you still satisfied after having two chips?
Hey, you doubled the amount you ate. Yeah. But you're still not satisfied. And just like that, this real estate market still is not satisfied. Yes. Our inventory has indeed doubled in many, many regards, but that still doesn't mean that we've got enough. As long as we have a shortage of supply of homes, the market isn't going to crash.
Interest Rates Are Still Really Good
Second of all, we've already addressed this. What reason? The second reason why it's a great time to buy right now. And number one, cuz the market isn't gonna crash. Number two because interest rates are still really, really good. When, when interest rates are right now, where they're at, you can lock them in, and let's just say something happens.
Interest rates do come down. If interest rates come down in the next couple of years, guess what you can do. You can refinance lock in that lower rate. But even if that doesn't happen, What the interest rates are at right now are still really good. And if you don't lock in now and purchase now, rates may go up.
If rates go up, you can't ever come back down, but if rates go down, you can always refinance. Don't forget that while the interest rates are good and interest rates are still very, very, very good!
The Alternative to Buying a Home is Worse
The number three reason why it's a great time to buy a house is that the alternative is still worse. Well, what's the alternative to not buying right now? Renting. I've got somebody, a client of mine that has been a client of mine for five years, waiting for the market to crash. He's continued to pay rent. Let's just say he's only paying $2,000 a month, which if you live here in the central valley, you know, that $2,000 a month in rent is low right now if you can find a place to rent. And what does he have to show for it five years later? Nothing! The landlord could evict him right now. And he's got nothing. Nothing. If you purchase a house right now, even if the market goes down a little bit, you're still in better shape. You're paying your mortgage, paying down your principal, as opposed to paying rent, where you're just literally burning that money up. The alternative is still worse. Three reasons why right now it's a great time to buy a house.
Number one, because the market isn't going to crash. The data just doesn't support a market crash. Interest rates are still really, really good. And because the alternative is still worse. If you want to own a home, listen, there are lots of ways right now that we can help get you in a home, in fact, better ways than over the last couple of years, because you have more choices and more opportunities. Right now is a great time to buy.
If you've been waiting, if you've been discouraged because of all the competition in the market over the last couple of years, now is the time to buy without that stress. The housing market is still strong. Interest rates are still really good. And the alternative is still worse.