Are you wondering whether you should buy a house now or if it’s better to wait? In this video, I’m going to share some real-life client examples of those who waited to buy and those who didn’t. We’ll look at the numbers so you have the best idea of what to do for your situation.
Paying Over Price
The prices of homes have indeed come down. Rates are a little higher than they were a year and a half ago—but they're also lower than they were four to six months ago. If you’re wondering whether this means you should buy now or wait, this is my recommendation.
I’ve had so many clients looking to buy a year to a year and a half ago that couldn't get into a home. If they did, they not only paid over asking price but also over the appraised value. This meant they had to bring that extra cash in.
A Case Study
We had one client that found a house they loved. They had lost out on quite a few homes because of multiple offers. They didn’t want to compete with cash offers, so they ended up paying over the appraised value.
This meant they had to bring in $25,000 over the appraised value. While they did get a rate of just over 3%, they paid not only their downpayment but an additional $25,000 on the property.
Easing Negotiations
If you get in a house now, we currently don't have as much of a competitive market as this client did when they decided to pay over appraisal. You don't have to give up appraisal contingencies or inspection contingencies—which I'd never recommend doing because you have no control over that.
People were removing loan contingencies with their offers. In this market, you don’t have to do that. You can actually buy a house without removing your contingencies, and you have time to get your inspections and appraisal done. You can also renegotiate if the property doesn't appraise because you have not removed that appraisal contingency.
Refinancing And Rates
Yes, the rates are now higher. But don't forget: we are going into a recession per the news. In a recession, historically speaking, rates actually will come down. So if you get into the house you really want and want to settle, you can always refinance and get that rate lowered later.
Of course, nobody has a crystal ball. I'm not saying prices might still come down a little bit. However, inventory is very low but demand is still high. With this supply and demand, it doesn't make sense that the market would crash.
Yes, the market could come down a little bit more. However, if you get locked in and get the house you really want and you're able to negotiate, you can often get the sellers to pay your closing costs.
The 2-1 Buydown
I just had a seller pay for my client to get a 2-1 buy down to buy down their interest rate. If rates come down, they can refinance. Let's just say right now rates are in the high 5s and low 6s; with a 2-1 buydown, they're able to get a rate of around 4%.
With this program, they're going to be at 4% for the next year, 5% the year after, and then at today’s rates a year after that. However, if rates come down to 5%, they can not only refinance but they can get that lower rate and have it locked in for 30 years.
In addition, the money for that 2-1 buy down—which the seller paid in this case—will be paid back if there’s anything left on the table. For example, let's just say it was $20,000 and they didn’t use it all. If it was a difference of $500 a month and there was $5,000 left that was not used, the seller will get that back.
I know that's confusing, so feel free to reach out if you have any questions about how it all works. I'd be happy to go over that with you in a little bit more detail.
Is Now The Right Time To Buy?
If you want to get the house you really want, buying now may be the right time. While I'm not saying prices won't come down a little bit more, you can always refinance when rates are lower. If you buy now, you're not going to have to compete with other people—especially for FHA and VA buyers.
In many cases, sellers will also help you with your closing costs so it’s less expensive to get into the home. Going back to our first case study, the buyer did get a 3% rate. However, they paid $25,000 over appraised value to get the home. They had to put in their 10% down plus that $25,000.
Instead of spending a few $10 more per month, they had to come up with $25,000 in one lump sum. that money is gone, going to rather spend a few $100 more per month than have to come up with $25,000 in one lump sum. And if the market comes down, that means that the extra $25,000 is gone.
Mind you, they are locked in at a really low rate that they’ll be able to keep for 30 years—assuming they stay in the house and they're still in a great position.
I’m Here To Help
I hope you enjoyed hearing my thoughts on whether now is a great time to buy. I know that there's going to be some controversy about what I just said, so feel free to leave me a comment. I'd love to hear what you have to say and what your thoughts are.
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