Would it be crazy to buy a house now?
This is a question that people are gonna ask you. I've heard this question come up a few times just in my social circles.
I'm gonna tell you there's two key reasons why it's a great time to buy a house. Not just a good time, but a great time to buy a house.
1. You have more buying power than you've ever had in the last 10 years.
Think about the last year. Just last year, if you were gonna go buy a house, you're competing with 10 other buyers, you're always gonna be in a multiple opera situation. You're gonna have to come in with non-refundable more money, go over full price, have an appraisal gap language, remove inspections before you've even done an inspection. You were at such a disadvantage as a buyer.
Let's contrast that with today:
When you come in as a buyer, first of all, sellers are reducing their prices en masse. Plus, they're gonna reduce their price again, when you make an offer because you're not competing. And you're gonna be able to negotiate closing costs, you're gonna be able to negotiate repairs and inspection things. You've got all kinds of windows to negotiate the best possible deal you can.
Now, what's holding buyers back is interest rates. I get it. But remember, when we look at the interest rate issue, we gotta look at over history. And the history of interest rates is super easy to look at. 50 years—don't believe me, go look on the internet—over 50 years, the average interest rates have been at 8%.
So for you able to get an interest rate at 7% seems high. I get it. But it's still relatively low historically speaking. And compared to what you're gonna pay next year, it's low.
Everybody's predicting a higher rate next year. Lawrence Yun, chief economist for NAR, thinks interest rates are gonna hit 8.5% (or more) next year. So 7% will feel like an absolute bargain.
2. When you're buying today, what you're looking at is what are you gonna do if you don't buy?
So if you don't buy a house today, which most of the people that I'm talking to are first time home buyers, then you're gonna rent. And if you're a renter, what we do know is that rents are rising quickly. Real estate's the best hedge against inflation for most people.
For most people in America, their number one cost of living is their house. Whether it's their mortgage or their rent. Now here's the advantage of having a mortgage payment instead of a rent payment:
A mortgage payment, you lock it in it's flat for 30 years—while all everything else is going up in price and going up in price and going up in price, your mortgage payment's flat. And so 10 years from now, it's gonna seem like an absolute bargain to your kids and your grandkids are gonna be like, I can't believe your payments that way. It's because you have a flat mortgage payment for 30 years.
What happens with rent? I've met renters of properties that I've purchased that have been sitting in their house for 25 years renting that house, renting that apartment for 25 years.
What do you think happens every single year without question? Your rent goes up. The latest study shows that rents are up about 9% compared to year over year. 9% is a lot. And if it continues rising by 9%, imagine what you'll pay in 10 years:
You're gonna be paying roughly at least double what you're paying today. But you're not if you get that mortgage. Your mortgage locks you in for 30 years. That's the advantage guys.
And the other advantage is this:
You can reduce that mortgage when rates go down. So 7% seems high, I get it, but it's gonna be higher next year. But what's gonna happen when the recession breaks, when the back gets broke on inflation (and it will), it will come back down. Then The Fed will start to lower that cost. And then guess what? Interest rates come down. You relock, you get a refinance and you get a lower mortgage payment.
That's why now is a great time to buy. You can negotiate the best possible you can. You can start having a flat mortgage payment that's a hedge against inflation. And you become a homeowner to start building equity.
So many reasons to be a homeowner today. It's an exciting time actually because you have so many more opportunities than you did last year at the same time.
Most millionaires are made during recessionary periods.
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