Recently, I’ve talked with a number of prospective buyers who are hesitant to purchase real estate. Often times they’ll say prices are too high or the market is due for some sort of correction — or even crash. While these are legitimate concerns that should not be completely dismissed, the real estate market (like the stock market) is very difficult — if not impossible– to time perfectly. The great part about real estate is you do not need to be perfect. Do your homework, stayed informed, find affordable market opportunities that work for you, and make the move. Here are a few reasons why having a long-term real estate strategy makes sense in any market:
The Future is Always Uncertain
It is impossible to know where real estate prices are headed in the future. Prices may continue to climb for another year, two years, three years, or five years. Conversely, they may level off or even drop a bit. While lower prices may seem beneficial, downward movement in prices often comes with increased interest rates. For borrowers, this counteracts any benefit from a reduced purchase price.
Another thing to consider is that potential first-time homebuyers may be sidelined due to low inventory and high prices. If inventory increases, these buyers could enter the market driving up demand and prices. More supply may also curb demand, bringing prices down.
The point here is: it’s very difficult to predict and accurately time your entry into the market. Don’t spend several years waiting for the perfect time to purchase, find something you can afford and start benefiting from homeownership.
Stop Paying Someone Else’s Rent
At times, renting a home can feel a lot like throwing money away. Instead of building long-term equity for yourself, you are essentially paying your landlord’s mortgage. Especially as rent prices soar in the area, you should put your money towards something that you will benefit from down the road.
Take Advantage of the Tax Benefits
An understated benefit of owning your own property comes from the tax deductions offered to homeowners. Mortgage interest, property tax, and private mortgage insurance can all be written off on tax returns. These significant savings serve to effectively lower your monthly mortgage payment. Essentially, you are paying less each month to earn equity.
Renting Out your Home is Always an Option
Just like the future housing market is always uncertain, so is your daily life. You may not be sure how long you’ll be working at your current job, how long you’ll want to live in a given area, or when your family needs may change. The good news is — especially in a high demand market like San Diego — you always have the option to rent your property. Renting your property is a great way to bring in extra income. That income should allow you to qualify for, and buy- another home. This ensures you aren’t forced to sell at an inopportune time, and leaves you with two equity earning properties.
There are Always Market Opportunities
The main thing that you need to remember when buying a home — do your homework (and use a knowledgeable broker). There are good opportunities to purchase property in every market. It might come from a motivated owner who must sell, off-market opportunities, mispriced properties, poor listings, short sales, or a number of other reasons. Stay informed, follow the market closely and know the areas. That way, you will be well positioned to identify and move on the perfect opportunity. As always, contact us with any questions about your home buying journey.