This is a question that more and more people have been asking me and for most situations the answer is it all depends on your specific and particular financial, life or family situation. But for some, the answer might be emphatically and a resounding “NO.”
The No. 1 reason is that there is a correlation between the prices you will pay for a property and the interest on your mortgage at the time you will be purchasing. However, this will be determined by your monthly PITI (principle, interest, taxes and insurance) costs, not including any sudden repairs or emergency situations.
Because our housing inventory and interest rates are at 50-year lows and demand is at a 50-year high, prices have escalated with rates not ever experienced by the purchasing consumer. Although some are still seeking homes to buy, there is a segment who have dropped out due
to price increases that have pushed and forced them out of the qualifying range or are becoming
more concerned that they may be getting in too late at the top of the market.
Here are my thoughts on these very disturbing and for what some view as precarious, uncertain and challenging times. It all depends on how you perceive and approach your individual and personal situation with a plan. You know that you always hear me caution that “if you fail to plan, then you most assuredly plan to fail.”
Waiting for the market to go down or worst case scenario to crash, as some are prognosticating, is in my opinion no different than what some are saying about the pros and cons about our vaccines and we all know about that without taking sides in this column. But keep in mind polio wouldn’t have been eradicated if it weren’t for vaccines and everyone getting inoculated! So for those who are waiting, considering dropping out or have already dropped out, my professional opinion is to get back in.
Here are my reasons and my thoughts about this market. All one has to do is calculate at current interest rates what your maximum P.I.T.I. is with whatever cushion you find necessary to add for repairs or sudden emergencies and then come up with your monthly “nut” of costs. So that is the amount that you feel comfortable sticking with as your maximum outlay. But I have always told my clients to go a bit higher as some sellers just might be ready to reduce their asking price because they have been overpriced for several weeks or even months. Listen, timing equals luck and you just might be in the right zone at the right time to score your first or second home, maybe? It’s far better to try and fail than to succeed at nothing, right?
Now calculate the number that you would like and hope and pray that the market prices come down to let’s say anywhere from 5 percent to 10 percent or more, which I seriously doubt for 2021 and possibly into 2022. So let’s just say that interest rates go up anywhere from 0.25 to 1 percent or more over time, reducing our current demand and causing the reduction in asking prices. Then figure out what your costs would be with the higher rates and then you can make a determination as to whether or not waiting would be the most advantageous and prudent path to pursue.
For some it just might make a lot of sense to wait for different reasons: your job or business might not be doing as well now and might not even exist in a few years due to layoffs, salary cuts, and technology eliminating your position as well as company buyouts and paring down on duplication of jobs, reducing labor costs. Of course, separation or divorce just might, unfortunately, be in the cards, too.
But on the other hand, it just might be way more expensive to wait even at today’s higher prices. The increase in real estate taxes coming down the pike in the next five years because of the higher interest rates over time will cost you much more over a 15-30 year period than the “supposed” reduction in prices due to higher interest rates, lowering the demand.
Here are some links to articles that will provide more insight as to market trends, things to know, and business information:
Philip A. Raices is the owner/Broker of Turn Key Real Estate @ 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned
designations as a Graduate of the Realtor Institute and also as a Certified International Property Specialist.
For a “FREE” 15-minute consultation, a value analysis of yourhome or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email:[email protected] Just email or snail mail (regular
mail) him with your ideas or suggestions on future columns
with your name, email, and cell number and he will call or
email you back.