Real Estate Market - Bubble or No Bubble
I often get asked about the market and about things people hear and read in the news. Over the weekend my friend Nic asked this:
Can someone please explain to me all of the news and speculation about a housing bubble and how it relates to an ordinary person?
If I hear a housing bubble is coming am I supposed to sell my house put all my things in storage and go live in a rental for a year or two and then buy at the bottom?
Am I supposed to burn money on rent for a year and try to time the market?
You don't day trade your house. You buy a house to live in for supposedly at least 5 years.
And having lived through all at least three or four housing bubbles if you go back to the 80s.
The only thing I come away with is saying that I should have bought at the bottom of each one.
Someone, please explain
There is always speculation about the housing market. I have been involved in the real estate market for 37 years in England, Canada, and now here. I have been licensed in Maryland since 2003. I remember 18% interest in the 80's. Homes were still selling but people got creative and assumable mortgages became popular amongst sellers as a way of selling their homes and letting the new owner assume their mortgage that had a lower interest rate.
Things that make this current market interesting or perhaps challenging are the added stress of Covid-19. During the shut down many homeowners took forbearances and now are having to pay extra. If they were lucky they were able to tack the delinquent payments onto the end of the mortgage term, however, those who agreed to pay extra every month to get caught up may not have the extra income to do so. In addition, inflation seems to be spiraling out of control. However, gas prices have dropped in the last week which will give some downward pressure on the cost of goods that need to be transported.
Owning a home is always going to be the best option, especially if you have to rent. If you are living at home and don't have to pay your parents. I have a young son still living at home, but, he does have to pay rent. It is the responsible thing to do, it prepares him for the day when he will move out on his own and have to budget for rent/mortgage and other things he needs to survive.
Last year I bought a home. I had been paying $1900 a month for rent, that same townhome is now $2100 a month. My mortgage is $1714 per month and the house is mine. $2100 per month equates to a purchase price of about $325,000. When you own a home you can claim your interest payment and taxes on your income tax. The same can not be said for your rent.
We all have to live somewhere and we can't always time our lives to coincide with the housing markets' highs and lows. All we can do is do our best and do what is best for us. What is putting pressure on the current market is rising interest rates, and continued demand for homes and, low inventory.
Owning your own home is the American Dream. The press will always report doom and gloom (if it bleeds it leads) and not necessarily the high points. If you are able, buy a home. It is the best investment and really is a hedge against inflation. Rents go up annually, and taxes go up but that is such a small portion of your monthly payment (and it is tax-deductible).
From an expert standpoint, hire an experienced Realtor who has been in the business a long time, someone who understands economics and market cycles. Get preapproved with an experienced, reputable local lender, who will have a vested interest in helping you get to the finish line.