Last year we said it was a good time to buy because prices were heading up and interest rates would eventually rise. Is Now the Time to Buy?
4 things affect the cost of owning a home, not counting maintenance of course. Those 4 things are debt, interest, taxes, and insurance. Last year prices were rising and they still are.
Interest rates are rising now too. Interest rates were artificially low because the Fed has been buying down rates by purchasing bonds to stimulate the economy. They’ve been purchasing about $85-billion-a-month in Treasury and mortgage bond purchases however a few fed governors have hinted that they’re ready to vote to discontinue buying down rates as soon as the economy shows signs of recovery.
Wall Street immediately sold off stock a few weeks ago in anticipation of this. Fed Chairman Bernanke later said they’re not stopping the program now although nobody knows for certain when the program could end.
Here’s what we know. SW Florida real estate prices were artificially too low after the real estate bust. They were so far below replacement cost as we worked through thousands of foreclosures and short sales. It was only a matter of time until the market recovered.
With inventory on the decrease and foreclosures down drastically from their peak, prices have been rising. After the bust we had two artificial moments that created an absolute buying bonanza for investors and buyers. Investors were the first to pick up on the opportunity as regular buyers were afraid the market could fall further. Regular buyers tend to follow the herd and react.
The artificial low prices are wearing off and soon the artificially low rates will too. This does nothing but add to the cost of home ownership. For the past several years we’ve pointed out what rising interest rates and rising prices could do, but sometimes it’s easier to see in graph format before it makes sense.
I always get a kick out of radio show call in listeners or people on TV that think Realtors just say “now is the time to buy” because they want a sale. While I’m sure every Realtor would like a sale today, there is just no way of getting around the facts. Last year was a better time to buy a home than today, and today may be better than next year.
We’re not saying to follow the herd. We told people in 2009 it was the year of bouncing along the bottom and it was. We told people back in 2005 prices were high and not sustainable. We’re not afraid to tell it like it is because we study market indicators.
Successful Realtors sell properties in up, down, and sideways markets. Our job is to educate the community on what’s going on today, and we feel like that’s what we do, Some people like what we have to say and others don’t. As consumers we don’t always get to choose the market, only how we react to the market we’re given. Realtors don’t control the market. If we did the market would have recovered much faster.
We’ll keep informing you what we’re seeing based on the data we look at. If you’re considering buying, we think now is a good time as you’ll be able to afford more home today for the same payment than you will next year.
If you’re thinking of selling consider two things. Prices are going up. When interest rates go up too it cuts into buyers’ potential, thereby limiting how many buyers can afford your home. Rising rates can stifle demand, which can hold back prices. It won’t help the buyer when rates go up, and it doesn’t help the seller either. Until the economy definitively turns around, nobody knows exactly what prices will do. All we can say is your options are better today than they will be next year.
Good luck and happy buying/selling!