What is the purpose of buying a house? To begin with, we must live somewhere. Beyond that it makes sense that we want to get most of the money we do have. Today, in many cases we can buy a house for less than or equal to what we can rent a house or apartment for. The reality is that we can use our housing to earn money. When we buy a house each month, we make our mortgage payment we are decreasing the loan balance. Simultaneously the housing market is increasing the value of our house, which doesn’t require us to do anything but live our lives. The result, in just a few years, is that we will have equity (value of our house minus the mortgage amount) that is ours.
We hear that housing prices are going to crash. First of all, let’s discuss ‘crash.’ Even in the 2008 housing bubble, prices fell by right at 20%. This drop was erased within approximately four years and if you stayed in your home, remember you had to live somewhere, you would have regained that loss and increased your value by about $125k or 68% by 2020.
There are many predictions that the price of housing will decrease again, similar to 2008. However, the data just isn’t there. While it’s not over, we have weathered the majority of the economic downturn, and we will be on an upward trajectory again. Let’s remember that housing is cyclical and there is a downturn about every 10 years. We are almost out of this downturn and historically speaking we will have about a decade of growth.
Housing prices have been rising since the short decline in 2008. With a low of $257k in Q1 2009 home prices have continued to increase. What this means for homeowners is that equity continues to rise. For buyers this means that purchasing a home is a good deal at any time that you can afford the monthly payment. As we mentioned there are a lot of financial benefits of home ownership. The key is to find a home priced where the monthly payment fits your current budget. Getting your foot in the door of home ownership will absolutely put you in a better place at any time in the future. A higher rate environment, 8% vs. 3.5%, does change the home price we can afford comfortably. It may also not be our ‘forever home’ but it will be the first step into what will be a much better financial situation and will allow you to get closer to your ‘perfect’ home.
Do you have questions about this process? We are passionate about the benefits of home ownership and would love to chat with you and answer your questions.