Should I Buy? How To Read The Real Estate Market
No matter what time of year it is, clients and friends are always asking me, “Is now a good time to buy real estate?” I firmly believe that real estate is always worth investing in, but buying at the right time can make a big difference in what you can afford. Understanding your real estate market is the best way to know whether or not it’s the right time for you to buy property.
Understanding Mortgage Interest Rates
Mortgage interest rates are historically low right now, which is great news for buyers trying to maximize their budget. The biggest difference in fluctuating interest rates is how it will affect your monthly payment. Even a fraction of a percentage point can mean a $100 difference or more in what you pay every month. If your monthly payment increases as a result of a higher interest rate, then the total amount that you can afford to spend on a home is greatly affected. The less you can afford, the smaller the pool of homes in your price range becomes.
When interest rates are lower, there is more competition among buyers because they can afford more and are eager to buy while the getting is good. More buyers searching for homes can mean stiff competition if several people are gunning for the same property.
Types Of Markets
A seller’s market is an ideal time to list your home since getting an offer at the listed price or above is likely when multiple buyers make competing bids on the home. Being a buyer in a seller’s market means tough competition, and often making a high-priced offer with aggressive terms is the best strategy to win the accepted offer. I always recommend that buyers write up a personal letter to include with the offer. Introducing yourself can help the sellers set you apart from just seeing the numbers on the offers, and know that you are the right person to buy their home. A personal letter also shows the sellers you are committed to buying the home, and not flippantly making offers on multiple properties.
A buyer’s market is the ideal time to buy. When there are fewer buyers shopping and more homes on the market, it helps buyers call the shots and drive the prices down.
Making An Offer
Review the comparable sales (“comps”) for the area before making an offer. The list price could be higher than the value of the home, or it may even be priced much lower as a tactic to tempt more buyers into creating a bidding war.
Real estate markets are cyclical in nature, and things typically slow down in the colder winter months. But in the spring and summer seasons, more buyers come out, and there is an influx of homes listed for sale, often making it the busiest time of year for selling and buying homes. For buyers waiting around now for a significant price drop, it seems doubtful since there are still enough qualified buyers in the market to buy up the listings. While the market will show signs of cooling off as we head from the busy summer season into fall, most homebuyers in major cities aren’t seeing less competition in their local real estate markets yet.
For buyers wondering if they should enter the market, it is always smartest to do so when you can afford a home without getting in over your head. Affordability is always the No. 1 factor, so today’s low interest rates and increased inventory are giving buyers an extra edge, making now a better time than most to purchase real estate.
Just because you might have more competition this year than in the past, that doesn’t mean you should shy away from trying to find your next home.