Here’s what you need to consider when buying in today’s market
The stock market is down, and interest rates are up significantly, but the sky is not falling. I’m here to tell you why and to assure you that now is a great time to buy a home.
When we look at the median sales price in San Mateo County, the numbers for August this year and last year are exactly the same. The year-over-year comparison has been flat, but we did see a peak in home prices around April, so from that period, we’re down about 15% to 20%. That’s what you’ll see the media focusing on, but the reality is home payments are quite similar to when rates were cheap.
Suppose we look at a home priced around $1.8 million at a 2.5% interest rate a year ago and compare that to buying the same home at around $1.5 million today. In that case, you could pay double the interest rate without substantially changing your financial outlook. That’s because you get to write off an equivalent amount due to the tax break. After the tax break, your net payment is almost identical. Of course, you’ll want to discuss your tax circumstances with a tax professional before you make any moves.
Here’s where things really get exciting: If we look three years into the future and guess at a possible refinance rate of 3.75%, you’d actually be looking at significant savings on that monthly payment. Remember that you date the interest rate, but you marry the home purchase price.
The cherry on top is actually the appreciation. If we assume a conservative growth rate over that three-year period, you could be looking at about 18% appreciation if you buy now. Someone who purchased a couple of months ago, at a higher price, might be a little bit underwater at that point.
Buying in the current market could net you a lower monthly payment and higher appreciation. If you’re considering buying, I’m here to help. Let me connect you with a great lender, and after you talk to your CPA, we’ll get you into a new home.
If you're looking for a reliable real estate advisor in California, consider contacting Jeff Lang. He offers a free consultation to discuss your real estate goals and help you achieve them using his vast experience in the field.