What is the most common question in real estate right now? I bet you can guess it, even if you don’t know anything about real estate. That’s right. You got it. By far the most common question I get as a Boise real estate agent is, “How did you get to be so smart?” Actually, I’ve never had that question and, in fact, have received the opposite question on many occasions. The real question I get all the time is “Has the market hit bottom yet?”
This question is definitely the million dollar question-literally. If I had the answer, I would definitely be a millionaire. It’s the same question we all loved to ask as a kid-”Are we there yet?” Just like back then, the answer is still no. No we are not there yet and no the market has not hit bottom yet.
I would be a millionaire if I could answer this question because so many people are waiting for that special moment when we officially hit bottom and they can jump into the Boise real estate market. If I could be the agent just for one tenth of one percent of the people who plan to buy when the market hits bottom, I could answer the question my wife always asks me, which is, “Are we rich yet?” I’ve talked to a lot of people-average Joes to very wealthy individuals-who are looking to buy Boise real estate either for investment purposes or for their own occupation. Many are still waiting.
Here are a few of situations where to wait for the real estate market to reach the lowest point isn’t sensible. First situation is the investor who is the owner of their home, but desires to move up. His big losses in the equity of his home make it so that he can’t doesn’t want to think about selling with such low prices. His plan is to wait until the real estate market starts climbing up again and then he will buy. Sounds smart, right? Well, when the value of his home goes up enough to sell his home, so will the price of the next home he is going to buy. Unless you are planning on selling in a high market, THEN RENTING while the market tanks, then buying when the market is low, it will always be a wash. If you already own a home, you are either going to sell high and buy high or sell low and then buy low. So these upgrade waiters are not going to benefit by waiting-and in fact, interest rates are eventually going to increase so their “time the market” strategy is simply going to result in paying a higher interest rate.
The other groups that I’d call the “sit on the sideline” group are those buying for the first time. They observe the drop in price and conclude-I think I’ll watch until the market drops even lower. You could probably defend this position more than the first group, but the end result is still likely to be disappointment. Most don’t realize that the majority of renters at this current time are shelling out more for their monthly rent than they would owe if they were to just buy that same home? Truthfully. The cost of homes and the interest rate are so low that the majority of monthly payments on Boise homes I have assisted client to buy are 20% under the average rental rates. That’s not all, the majority of people will save equal to $150 to $200 per month in tax savings when they invest in a regular starter home because of interest deductions. Considering taxes, you will be paying too much by around 30% per month when you choose to rent. This shows that if you can are eligible for a mortgage, you will want to buy except if you know that within the next three years you will be moving.
About this time I get another common question “Have you finished talking yet?” Almost. I have only met a very few homebuyers who actually put into consideration the interest rate when they are thinking to buy a home in Boise that is “priced well.” (I know, being a Boise home isn’t a main factor. But Boise homes are what come to mind because that’s where I do my real estate business.) Perfect example. At an interest rate of 5%, with a 30-year mortgage, a $100,000 property will really cost you $193,000. Not good at all. Then consider, if mortgage rates are raised one percent to 6%, that exact $100,000 property will cost you $215,000. Look at that difference of $22,000. No one would want to pay that additional 22% on their home or property? No way. But that’s exactly what you’d be doing if you wait to long and interest rates are raised even one percent. Quit waiting for the rise of interest rates. It’s very doubtful that the prices on homes will fall enough to compare to the rise in interest rate expenses you’ll be paying.
Still got your attention? That’s great because I’m doubtful even my wife made got this far when she was proofreading it for me. The big sum up-when thinking about investing in real estate, it isn’t smart to wait (especially when you are a move-up buyer.) Especially remember those interest rates. They are to be taken as seriously as the price of the home when you consider a purchase. No one gets to choose pick their rates so don’t wasted your chance while the rates are so low.