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Deerwood Realty and Friends Podcast
I was talking to a friend of mine the other day about the housing market. It’s great for sellers, but buyers are really having a tough time. My friend asked me if they should even bother with trying to buy a house right now and we went over some of the pros and cons…seemed like it would make a decent Youtube video so here we go. Pros first and then we’ll flip to cons
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Thoughts/questions:
Pros(Waiting)
1. You could get a better deal Do you know what the housing market is going to do next year? I have no idea. There has got to be a day sometime down the road where there aren’t multiple offers over asking on every single house.
2. You shouldn’t have buyer’s remorse I was reading an article where something like more than 80% of new homebuyers experience some type of buyer’s remorse. This is usually due to the unfriendly sale terms the buyer agreed to in the hot market. If you take your time, look for just the right house, you should be able to eliminate buyer’s remorse
3. There might be some clarity in the market Right now, most buyer’s agents are running around writing offers with no idea what’s going on …they just know that they need to be over asking and with little to no contingencies. We see inflationary pressures all around us outside of housing as well. Some time to digest what did happen could allow for a better buyer experience.
4. The bias is on the seller side If you are buying a house right now, heavy negotiations with the seller are not on your side. You should be expecting to be in every offer at over asking, as clean as a contract as possible…this means inspections clauses waived, appraisal contingencies waived, strong cash offers. There will be a time when the buyers have at least some control, perhaps it would be better to wait until then.
5. You should have more time to make a decision Right now, house goes active Thursday night, showings start Friday, offers due Sunday. That doesn’t give you a whole lot of time to make a decision on your purchase. Some more unserious agents are going no show until open houses on Sunday afternoons and then offers due on Monday. That really doesn’t give the buyer a whole lot of time to make a decision. You get into this situation where you aren’t sure if you can go on vacation over a weekend because you might miss out on a home that is perfect for you.
6. You have the opportunity to build a bigger war chest I have been seeing some buyers coming to the market where they are in a terrible cash position. Little money for escrow, little money for down payments, and virtually no cash should there be an appraisal gap. This is a very weak position to be in during this seller’s market. Instead of settling for just anything you can afford, perhaps it would be a better strategy to wait and build up a stronger cash position. This should allow you to buy a better home albeit more expensive AND have a better chance of getting an offer accepted.
CONS(Waiting)
1. The same people that have been saying wait to buy have seen houses only accelerate in expense to more than 30% in the past two years Believe it or not, had you bought a home that was overpriced just 2 years ago, you likely already have significant equity in your home. Although I suspect at some point this wouldn’t be the case, you can see what waiting for a good deal has done so far….only gotten more expensive
2. The market could go even higher Some people say the market has to continue to go up because there are so few listings coming to market and we are in the middle of a population explosion. I don’t know if I agree with that, but that is the argument.
3. Sometimes, putting off a home purchase is also crimping your life I often help first time homebuyers who are considering getting married, considering having kids, etc. They are in the moment now. Perhaps they are getting married and want to have that first home to move into. Perhaps there’s a divorce and there’s no desire to rent. There are moments where you just have to buy a house as your life is moving in that direction. Why wait just because the market is crazy?
4. Rents are rising as fast or faster than home sale prices It used to be, there would be some relief in the rental market when housing prices were increasing…perhaps a delay in the rent increases versus lower occupancy. Not right now! Landlords are telling their renters that they should expect SIGNIFICANT rent increases during their next lease term. That means, no safety in the rental markets either. And, should you be one of the unfortunate who have to rent to save up money to buy, this can have the effect of eating even more into your savings. Not a good situation at all.
5. We never really know what the market is going to do When I bought my house in 2007, it was the height of the market. My neighbor actually introduced himself to me by telling me that I was stupid for ever paying so much for a house. 15 years later, and I’m sitting on a house with a tremendous amount of equity…and my purchase at the time is basically rewarded every year of ownership as home values increase.
Can house prices fluctuate wildly? Absolutely. But the track record for owning a home for a decent amount of time and not losing money on it is pretty good historically. The key is buying a house for the right reasons and for the right situation. If you are looking to stay in a location, have steady income, and are looking to settle down for many years, you can buy now without worry.
6. Sometimes, a little motivation makes things possible, when you quit, it might set you back years I know some buyers who sit out of the market for a year, another year, another year, pretty soon 5 years are gone and they’re still in their crappy apartment. That’s 5 years worth of equity you could have gained by owning a home. When considering buying a home, the question becomes, if not now, when? And it’s true. If you have the motivation to buy and then you don’t, where will that motivation come from in the future?
That’s what I have, 6 pros and 6 cons. If you enjoyed this content, do me a favor and click the subscribe button…just this week I’ve gone from 61 to 63 subscribers…which I really appreciate. It would be great if I could get to 100 by the end of the year.
Thank you for watching, thank you for listening, and I’ll catch you on the next one.
Sources: Me
Contact me at media@deerwoodrealtystl.com
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