Interest rates are up, inventory is low, prices are up. This has everyone asking is now a good time to buy real estate? Why would anyone want to buy a home right now? Rents are up too. Staying in a rental is not a great option. Rents go up almost every lease period. If you have the down payment and income, why is it not a good time to buy? The same is true for a second home. If you have the down payment and income, why is it not a good time to buy? If you plan to pay cash, with the highs of the stock market, maybe now is a good time to diversify with real estate.
Other reasons now is a good time to buy
Inventory is building. From April 30 to July 1, inventory went from 423 properties for sale to 690 properties for sale. That’s a 63% increase in inventory. The market shifted from a 4 month supply of homes to a 6.5 month supply. That shift is a move from a sellers market to a neutral market. That means a buyer has a little more power in the negotiations that in the past. Maybe now is a good time to buy real estate.
With the extra leverage and motivated sellers, it could be possible to have the sellers buy down the interest rate on the buyer’s mortgage for a few years. That could save a buyer thousands of dollars. For example, the seller could pay the lender the interest at closing to adjust your rate down by 3% for the first year of mortgage payments, then down 2% for the second year and down just 1% for the third year. If at any time, the rates fall lower, the buyer has the option to refinance just like any other loan.
This means, on a $500,000 loan, according to our mortgage calculator, the first year of payments could be reduced from P&I of $3327 to $2387, a savings of $940 per month. The savings for the second year would be about $643/month and $329/mo for the third year. Of course, the fourth year, the rates go back up so a buyer would have to be able to qualify for a loan at the higher interest rate for this to work.
Talk to a local agent
With the market looking like a shift is in the works, sellers may be more willing to help a buyer out. If you have been thinking about buying real estate, talk to a local agent and see what options are available. A purchase may be more appealing than you thought.
Disclosures
Statements made should not constitute investment advice or be counted on as actual payments or loan terms. Advice from finance & lending professionals is recommended to determine the right course of action for each individual and their specific situation.
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