Why You Should Be Buying a Home NOW!
If you are like anyone else considering buying a home in 2019, you have probably asked yourself this proverbial question more than once. “Should I wait for prices to come down further or should I pull the trigger now”? As no one likes the idea of paying more for a home than necessary, it’s a legitimate question. In speaking for myself and knowing the opportunities of today’s market and the fact that real estate is a long game…the answer is a resounding YES! And yet, before speaking for the masses, let’s take a look at a few important factors you should consider prior to making a decision.
1. Life Stages
Are you tired of renting, did you get a new job, are you getting married and or ready to start a family? If the answer to any of these questions is yes and you are in the financial position to do so, now may be the time to buy.
2. Home values and the current market
In looking over the data from 2018, we saw that the Westside real estate market began to shift in April and started showing actual signs around June, with sales all but falling off a cliff in the months of August & September. This led to an increase in the number of days on market, leading to a pullback in prices as motivated sellers were being forced to reduce their asking prices. In 2019, we see that closed sales for the month of May in both Palms/Mar Vista and Santa Monica were down double digits (14.8% and 13.6%), while West LA was down 9.3%. Culver City, on the other hand, had a 13.2% increase over May 2018. This trend of fewer homes being sold would suggest there to be some good buying opportunities, as sellers are being forced to keep their pricing in check to a less motivated pool of fewer buyers
3. Interest rates
In 2018, the interest rate on a 30 yr. fixed mortgage averaged around 4.54%, with its lowest point being 3.95% in January and peaking on November 8th at 4.94%. Two weeks ago on June 6th, interest rates dropped to 3.82%, their lowest point in over two years and over a full percentage point since their peak in November. Let’s consider the following example:
Scenario 1: A Home in June 2019 w/ a Two Year Low-Interest Rate
Sales price: $800,000
Loan amount: $640,000 (20% down payment = $160,000)
Mortgage rate: 3.82%
Mortgage payment: $2,989.46
Total paid including interest: $1,076,204.87
Now imagine home prices fall 10 percent over the next year or two, while mortgage rates rise from 3.82% to 4.94%, which is where they were six months ago.
Scenario 2: A Lower Purchase Price w/ a Higher Interest Rate
Sales price: $720,000
Loan amount: $576,000 (20% down = $144,000)
Mortgage rate: 4.94%
Mortgage payment: $3,071.04
Total paid including interest: $1,105,573.64
As you can see, with a 10% drop in prices and a 1% increase in interest rates, you are still paying $81.58 a month or $978.96 a year more for the same property. So the question becomes what are we most likely to see first, a 10% drop in LA Westside home values or a 1% increase in interest rates from a current two year and still low by historical standards?
Based on this factor alone, it would seem to support the cause for buying now instead of later. As I mentioned before, when you understand the opportunities of the current market including the cost of money and that real estate is a long game, my advised answer is YES…you should be buying NOW!
If you have questions about closing costs, would like to learn more about the buying process, or about the LA Westside market, don’t hesitate to call/text us at 310-403-7381 or send us an email at email@example.com.