What Buyers Need to Know

Are you wondering whether now is a good time to purchase a home? In the past 10 years, I have personally never had a buyer who regretted the decision to purchase a home. In fact, it's quite the opposite. I hear over and over again, "Buying my house was the best decision I ever made." Is this still true today? Let's look at the three components of buying a home: the property, the price, and the loan.

After three very busy years in the local real estate market, the market seems to be leveling off to favor the buyer. There is a nice inventory of homes to choose from and there is time to make an informed decision. The frantic atmosphere of multiple bidding and rash decisions has come to an end. Right now, buyers have a unique opportunity. Now is the time to locate a dream home, negotiate terms and price, request repairs, and obtain favorable financing. This is the market you have been waiting for!

Buyers often focus on price to the exclusion of other important factors. Remember, you will only deal with price twice: when you buy and when you sell. The home and the loan will influence your life daily. Even if appreciation slows, the Bay Area is a great place to invest in real estate. Employment opportunities abound, there is a scarcity of homes and it is one of the best places in the world to live. That's a winning combination! Let's assume appreciation slows to 5% annually. A home purchased now for $500,000 would be worth approximately $638,000 in 5 years. If a person had put $50,000 down on the home, that is over 250% return on cash, not including the advantages of a tax deduction and the joy of owning one's own home. And I bet the person who makes that decision will someday be saying, "Best decision I ever made!"

The third component is the loan. Interest rates are still historically very low, but are expected to increase conservatively in the next year. This can have a significant impact on buying power. If a person were to purchase an $800,000 home with 20% down at 6.63%, the monthly payment would be $4100. If interest rates increased to 7.73%, the monthly payment on the same purchase price would be $4576. With the increased interest rate, one would need to reduce the sales price to $733,400 to maintain the $4100 monthly payment. The buyer would have just lost nearly 10% of their purchasing power. It is easy to see how interest rates have a daily impact when one is paying $476 a month more for the same home at a different interest rate.

I am a Realtor® and I am also a homeowner. I always believe the best time to buy a home is now. Now is the only time you have any control over. The past is gone and the future is not here yet. You'll be glad you made a proactive decision for you life!