It is no secret that 2021 has been one of the hottest seller’s markets of all time. In many real estate markets throughout the country, real estate prices are at historic highs. This is true of the Greater Houston market.
So it does not surprise me that one of the most frequently asked questions I have received recently is: “Is now the right time to buy a house or should I wait until the market cools down?”
Perhaps you are thinking about buying a house and have asked this question yourself.
- The heart of this question
- Short term or long term investment?
- The economic cycle
- Additional reasons why now is the right time to buy
- Four ways to prepare to purchase
At the heart of this question is the fear that if you buy at the top of a seller’s market and then the market cools down, or even crashes, that your house could be worth less than what you paid for it within a few months or years after purchasing it.
This is a reasonable concern. When you consider that purchasing a house for most people is the most expensive purchase they will ever make, you want to make sure that you make a sound financial decision.
No one wants to purchase an expensive asset that is worth less than you paid for it within a few months or years.
But here’s where I will pause for a moment and pose this question: Should you view your home purchase as a short term investment or a long term investment?
If you view it as a short term investment then, sure, you run the risk of buying at the top of the market and seeing the value dip in the short term if the market cools down after you purchase. This is the risk that house flippers take. You can lose big money if you’re trying to flip and the market shifts between your purchase and sale.
But you aren’t a house flipper, you’re looking for a place to call home!
And for that reason, you should view your home purchase as a long term investment.
When you approach your purchase with this mindset, then it is fairly safe to say that over the course of 10 to 20 years that your house will be worth more than you paid for it today even if it drops in value for a short period of time in the interim.
That’s how the economic cycle works. You have high points (seller’s markets) and low points (buyer’s markets) but also long term growth (appreciation). And because of appreciation, the value of your home in a future buyer’s market, if you hold the asset long enough, will someday be higher than its value in today’s seller’s market.
Again, it may take 5, 10, or 20 years, but that’s exactly why it’s a long term investment.
Here are some additional reasons why now is the right time to buy a house:
- Interest rates remain historically low. So while you might pay more for a house, your lifelong interest will be less compared to higher interest rates from previous years.
- If you’re currently renting, rent is also rising by an average of 16%! And monthly mortgage payments tend to be less than rent for comparable property.
- If you currently own your home, the value of your home has most likely gone up since you bought it. So even though you might pay more to purchase a home, you should also make more when you sell your current home. It’s a two way street! Plus, the equity you’ve captured is tax-free income so long as you have lived in your house for at least 2 of the past 5 years!
Whether you ultimately decide to purchase now or purchase later, here are four things you can do today to be prepared for the day it is time to purchase:
- Watch my First Time Home Buyer Course (YouTube). Even if this is not your first time buying, it is a great refresher on the process.
- Pick my brain! I love when people ask me questions about real estate. Let’s schedule a time to chat!
- Download my exclusive HAR App so you can start seeing what’s available. (Must be viewing on a mobile device for link to work).
- Talk to multiple lenders about financing options. If you are not ready to get pre-approved, that’s okay! A lender is still there to help you understand what products are available, how much you might qualify for in down payment assistance, and at what price point you might be able to purchase. Click here to see my list of recommended lenders.