Last month we talked about why it was a good time to sell and I left you with a Cliff Hanger of a question – could it also be a good time to buy at the same time?
Well today’s market update answers that question. The short answer is a resounding YES! Here’s why.
If you recall, I mentioned last week that the two data points we have watched over the last 6 years were closed sales and inventory. Last year, the closed sales actually took a small dip negative, and inventory was still decreasing year over year; however, month over month, we noticed that inventory is actually UP. So now we know that sales are down and inventory is up.
Well, what else is important for a Buyer in a real estate market? THat’s right – interest rates.
Interest rates have increased almost 1/2 percent since last summer.
Now most buyers would say “I’m going to wait till the market goes down, and then I’m going to buy at the bottom of the market.” That’s great in theory, but two potential problems: (1) If you don’t have cash, the cost to borrow the money will be higher than it is right now when you decide to buy; and (2) We never know where the bottom is. Take an example: If you have a budget of $1,000 per month and you get a 4% rate, then you can qualify for a $210,000 house. However, if that rate goes to 5%, then you can qualify for only a $187,000 house. That is a $23,000 difference! Put it another way, for every 1% interest rate change, the buying power decreases 10%.
Take advantage of the market. Don’t wait for the market to drop because we don’t know how much the interest rate will increase over that same time.
And if you are not yet ready to buy, what can you do to prepare? SAVE CASH! Cash is King, but never more than in a Buyer’s market. Also, the cash will help you offset the rise in interest rates so you can still afford the home you want. So plan ahead!
I heard this recently – Failing to Plan is Planning to Fail. Call me, and let me help you plan for success.