Many are still reluctant to enter the market after what we have seen happen to it in recent years. We saw prices increasing exponentially and seemingly without end. Then we saw chaos as the market crashed with the great recession, and many painful reminders of how many people lost so much, especially in Real Estate. More recently, at least here in Southern California and more specifically in the Inland Empire, we have watched prices skyrocket again for a year or two. And most recently we have seen a slowdown, and last month (October 2014) even a downturn. Most see this as an expected correction, as we head to a more normal market. This may actually be the first reason you should Buy Now.
The large increase in prices for more than a year signifies that they have reached the bottom and are their way back up. Most all indicators point to prices continuing to increase, though at a moderate rate. This means that you will pay less for a house if you buy it today, as opposed to waiting. The fact that the increase will be at a smaller rate (7-12 per cent over 5 years) enables it to be sustainable, so it will continue to increase without the fear of another downturn or crash. This may be the second reason you should Buy Now.
Another reason this is a Good Time to Buy is the price of rent continuing its constant rise (even through the recession), has made it actually cheaper in many cases to make a monthly mortgage payment than rent. Of course this is also due to the lower home prices and lower interest rates, both of which you can lock in now and guarantee your housing cost will never go higher. This is something you can not do as a renter. Combined with the tax deduction offered homeowners, along with the ability to make the changes and improvements you desire, there are a handful of good reasons that Buying Now Makes Sense.
According to the experts, well, they just don’t really agree. Out of 100 Real Estate Experts and economists surveyed, 40% responded that it would still be another 3 to 5 years before we return to a normal market. While a third believes it will take a year or two, 20% see the recovery either here already or happening in the next twelve months.
A Challenged Economy was cited as the major reason. More of the adults today that are renting have roomates to help them afford the rent. So they cannot afford to qualify to buy a house. With the low and slow growth of wages, they remain stuck here, unable to enter the housing market. Because of the economy, many millennials are holding off on things like marriage and home ownership for now. The housing market itself has kept many retirees in their homes longer, until they have regained the appreciation they need to move on.
That being said, I believe this is a great opportunity for those renters that can afford to pay the rent themselves. In many cases they will also afford to qualify to buy a house. With the extremely low interest rates now, the house payment may very well be less than the rent they are paying. Many sellers are also willing to help pay their closing costs and make it even more affordable.
Buying a house is still 38% cheaper than renting, according to the newest edition of a respected ‘Rent Vs Buy’ nationwide report. Though the gap has actually narrowed from last year (44%) it still appears to be a compelling reason to purchase. The degree of the advantage of home ownership depends on the area, and varies substantially. Nonetheless, the combination of increase in inventory and still historically low interest rates equate to this being a good time to buy.
With as many as 4 million first-time buyers wanting to enter the market, many will encounter some issues as not all market conditions are favorable to to new buyers.
Current renters aspiration for homeownership is particularly strong, with about 10% nationwide saying they would like to buy in the next 12 months.
BUT…. the combination of rising interest rates coupled with low inventory could push homes out of reach for many would be first-time home buyers. Overall, the inventory has increased slightly from a year ago, but remain substantially below optimal levels. Interest rates, while still historically low, have risen at least 1% from their record low.
For the housing market to continue its recovery, availability and affordability to meet the demand for this group is critical. We are beginning to see these factors waning in some area markets.
For those that are pursuing a Short Sale due to no longer being able to afford their home, there is at least a little help available to them for moving and relocation expenses. The funds come from the State of California through the Transition Assistance Program (TAP). The State of California is providing up to $5000 in transition assistance to qualified homeowners who can no longer afford to stay in their homes. Those interested do need to apply for the assistance, and do need to maintain their home. I can provide further information for anyone interested.