When working with potential buyers, one of the most common questions we get asked is, “Should we buy now or wait?” And with a market like we’ve had over the past few years, it can be difficult as a buyer to answer this question. Never fear. We are here to help!
While every buyer’s situation is unique, our goal for you remains the same: to help you make a wise financial investment for you to enjoy for years to come. So, let’s talk through two primary factors to consider when answering the question of buying now or waiting.
What does the market look like now?
How is the market trending?
What does the market look like now?
Over the past couple of years, you have probably seen (or maybe experienced for yourself) that there has been an extreme seller’s market. Homes that hit the market have multiple offers within the first day and the house sells for far above asking price. Lower interest rates along with rapid growth in the DFW area has led to the demand and homes appreciating greatly in value.
This year, we’ve seen interest rates rise as a means to combat inflation, which has also in turn slightly cooled off the previously “hot” seller’s market. While there is still not enough inventory (homes for sale) to create a balanced market here in the DFW, we are seeing that buyers have a better selection and may even be able to purchase a home at asking or without having to go as much over the asking price as we saw was necessary even earlier this year.
Why do interest rates affect buying power?
Interest rates directly affect your buying power because interest rates are one of the four things that make up your monthly mortgage payment when you purchase a home. The four components of a mortgage payment are:
Principle (the amount you owe on your mortgage)
Interest (the interest you are being charged for the loan)
Taxes
Home Insurance
So, think about your mortgage payment as a pie and each of the four components listed above is a piece of that pie. The larger the interest rate is, the less of a principle payment you can afford. On the other hand, if the interest rate is lower, you can afford a higher principle payment and therefore more house. Therefore, the interest rate directly affects the amount of house you can afford.
How is the market trending?
While we don’t have a crystal ball to perfectly predict the future, most agree that interest rates will continue to rise throughout the remainder of the year. Increasing interest rates will mean two things: (1) It will only get more expensive to purchase a home and (2) there will be less buyer demand and therefore less of a seller’s market.
The DFW area is also predicted to be the metro that sees the largest population growth for the remainder of the year. This is good for those that are on the property ladder or are looking to invest in the area, because as people continue to move to the area, there continues to be a demand for property.
Some areas across the United States that are not experiencing the growth that the DFW is seeing have become over inflated and may be seeing a price decline in the coming months. That, however, is not anticipated here in the DFW because of the population and business growth that we will continue to see. Therefore, homes will most likely continue to appreciate due to the steady demand of homes, but at a slower rate than we have seen over the past couple of years – which ultimately was unsustainable for the market.
So, now to answer the question: Should we buy now or wait?
The answer? Buy now.
For those taking out a loan, the cost of waiting is likely going to outweigh whatever you could save while you wait. When considering the cost of waiting, you have to ask yourself, are interest rates and home cost appreciations working against your savings? In other words, are interest rates holding and home costs appreciating at a rate that you can’t outpace with what you are making and saving while you wait? Your lender can help you with this forecasting as you consider.
For cash buyers, now is a great time to invest in property to hedge against the current inflation rates. Cash buyers will also still continue to have a competitive advantage in this market.
Ready to buy now? Give us a call and we would love to help you. Still unsure? Remember that we are always here to have a conversation about your unique situation and help you make the best decision when it comes to this financial investment.
Until next time,
Brianna and Keelie