Oct 5 2021 38376 1

Dated: October 5 2021

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Is Now the Right Time to Buy? 12 Factors to Consider

The real estate market is booming and many buyers are looking for a new home. One key reason the housing market is prospering is low mortgage rates. But there are other factors would-be homeowners need to consider when deciding whether now is a good time to buy.

1. Consider Population Growth

When considering an investment property, look at the fundamentals like population growth. When people are moving to an area in droves, the demand is high and we have a healthy market for buyers to find the right properties and get involved.

2. Look at Rent Projections

People who are interested in buying a home as an investment property should look at rent projections in the area. Properties may be hard to make profitable today, but if rental rates are projected to climb, the property stands to become profitable over time. If the property is in good shape, lock in the low mortgage rate now and be diligent about raising rents as the market supports it.

3. Don't Wait For the 'Perfect Time'

When mortgage rates go up, the price of housing eases. It is very hard to plan the perfect time to buy. If buyers are waiting for prices to decline or for a market correction, they may be facing higher interest rates. If a prospective buyer needs housing, they should buy when they would like to. A large part of homeownership is intrinsic and not financially driven.

4. Examine the Timeframe

In nearly every market, real estate is a great long-term investment. The biggest consideration for buyers, aside from basic affordability, is the timeframe for their investment. If you are thinking of selling in fewer than five years, you are taking a serious risk of losing equity. If your time horizon is 10 or more years, your chances of substantial value appreciation are greatly increased.

5. Project Future Job Stability

For most families, job stability should be the main consideration when thinking about buying a home. Careers primarily dictate which area a family lives in and for how long. It's a cliché, but it really is about time in the market, not timing the market. Despite some highs and lows, the real estate market has gone up over a long enough period of time.

6. Consider the Primary Motivation

When debating on whether now is a good time to buy, it's important to consider not only mortgage rates but also what the primary motivation for moving is. In strong seller's markets, it's important to be prepared to act quickly, have your finances in order and be clear on what your needs and wants are. Your level of preparedness will help you navigate the competitive market

7. Watch the Market

Right now it comes down to a buyer's personal risk tolerance. In such a competitive market, buyers are writing offers over the asking price, putting more money down and even waiving contingencies. Those are all great strategies, but buyers shouldn't feel trapped into doing them. If they aren't comfortable, they should keep watching the market so they're ready when it begins to cool.

8. Look at Migration Patterns

When I’m contemplating buying an investment property, I always consider the migration patterns in a market. One of my favorite resources is the U-Haul website, which lets you know where people are moving to and from. This will help you determine if there is going to be a strong base of renters in your market. If I can’t rent it out, I’ll keep looking even if a property is priced low

9. Track Economic Cycles

Consider economic cycles. Are we in a period of inflation or deflation? Rental expenses increase during inflationary cycles, meaning your money will buy you less tomorrow than it will today. Hard assets, like real estate, provide an excellent hedge against inflation. If you can afford to own instead of rent, your home can provide a solid foundation for your financial future.

10. Stick to Your Specific Criteria

Low mortgage rates are the bread of butter of any excellent investment. That being said, buyers should focus on the specific property they want to acquire, not the generic terms of the market at large. To use an analogy: “just because the pond is full of fish doesn’t mean you’re going to catch a big one.” Make a list of your investment criteria and stick to it

11. Factor in Property Taxes

Once you buy a house, you'll be responsible for paying property taxes as long as you own the property. It is crucial to look at the annual property taxes for a property and make sure you are comfortable with the amount. Factor this into your calculation as taxes are an annual expense you cannot get away from.

12. Carefully Consider Affordability

At the end of the day, the most important factor is affordability. Can you afford to buy? It is a two-part question where you have to consider how much cash you have/are willing to put into a transaction and how much you are willing to pay monthly. Yes, rates matter when thinking about the monthly payment, but so does the price point.

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