Is it a good time to buy a house?
If I had a donut for every time I have been asked this question over the past quarter century, my whole family tree would have diabetes.
In the pantheon of real estate inquiries, it remains unrivaled. All other frequently asked questions flow from its headwaters. You never get to is this a good area, or how are the schools without first fielding the pre-requisite question that begets all others.
No one cares about the specifics until satisfied that buying a home at this (or any) particular time is a good idea in general.
Over the years, I’ve had different responses to that question based on current market forces, prognostications, etc. Sometimes it’s a no-brainer, like when the foreclosure and short sale market started to clear out on the back side of the great recession of the late aughts. It didn’t take much foresight to realize that prices had reached a nadir and were about to slingshot the other way.
Indeed, over a decade of value gains catapulted those fortuitous buyers to equity piggy banks larger than even the most optimistic predictions could have anticipated.
Similarly, there were clear signs in 2005-2006 that an impossibly hot market was bound to cool. Once again, it wasn’t too challenging to see a slowdown and potential value dip looming, even if the full scope of the crash was far beyond what anyone saw coming.
Beyond those times where there are bright flashing warning signs, however, what I have learned more than anything in this business is that the prognostication game is a fool’s errand. Things change too rapidly, and factors too numerous to account for and predict tend to upend forecast models with alarming regularity.
I have been expecting a dip in values since about 2018, convinced that price points have become unsustainable, particularly for entry level buyers. No entry level buyers means no move up buyers. And so on and so forth. It seemed the inexorable march of rising prices was fueled by artificially low interest rates. As soon as rates crept up in response to inflation, I just knew values would suffer as a result.
And I was dead wrong.
Sure, the market cooled when rates first shot up, and prices did see a modest dip. Not nearly as sharp of a decline as I expected, however, and it came much later than I expected.
If you listened to me and sold in 2019, you likely lost out on some additional gain. If you purchased despite my warnings, you realized additional gain.
Why didn’t it go the way I expected? Because homeowners that locked in 2.5 – 3% interest rates in the last five years are now refusing to move.
Why would they?
Those who would like to sell to upsize, downsize, move out of state, or whatever, will have to move somewhere. If they require financing to make the move, as many do, they can look forward to an interest rate that is, at minimum, double their current one.
Kinda kills the vibe.
Fewer sellers, means fewer options for today’s buyers. High demand and low supply has kept home prices high, despite affordability concerns.
The point being that the market is always as likely to zig as it is to zag, because the thing you think is gonna be the thing, turns out not to be the thing at all.
So when people come to me today, in 2024, asking if it’s a good time to buy, what do I tell them?
I answer the question with two of my own:
- Are you financially able to purchase a house?
- Does the security of being a homeowner outweigh the freedom from attachment that renting offers?
If you answer ‘yes’ to both of these questions, it’s a good time to buy a house. If you answer ‘no’ to either of them, it’s not.
Stop listening to the talking heads with red faces and halitosis who shout their investment/financial strategies at you via cable TV. They don’t know you or your goals. If they want to watch the price of yak milk in southern Sri Lanka to determine whether the Swiss Franc will hold up to the deflationary pressure in the Argentinian gold bullion market, thus spiking land values in the least of the Lesser Antilles, creating a flood of American ex-pat migration, leading to a glut in the US housing supply that crashes the national median sales price by $5000, let them. Doesn’t mean you need to join them on that hamster wheel.
Need a house?
Can you afford to buy one?
Want to put some roots down?
Great.
It’s a good time to buy.
