Are you wondering whether now is a good time to buy a home?
There are 3 important questions to consider:
1) Can you afford it?
2) Is this the right market?
3) Is it the right time of year?
Stay tuned. I’m breaking it all down for you.
Can I Afford it?
Let’s start with the single most important factor in the entire equation, can you afford it? The only way to know whether you can afford to buy a home, and HOW much home you can afford is to get pre-approved for a home loan. Getting pre-approved is free and at no obligation. Make sure to start there.
If you’re not sure what the requirements are to be approved for a home loan, watch my video, “requirements to buy a home.” I’ll link to it below in the caption
If you CAN afford to buy a home, you SHOULD. Period. And the sooner you do it, the better. Why? Because historically, real estate prices overall, trend upward, so the longer you wait, the more you’ll pay. Yes there are peaks and valleys in the market, but here’s the thing, home prices don’t work like this (signal hills and valleys on a flat line), but rather they move live this (signal hills and valleys on an upward trajectory), as the world gets more expensive and inflation grows, cost of housing will always be more expensive in the future than in the present. Period.
At this point you may be wondering, “well, what about the housing crash?”
1) The housing crash of 2008 was a once in a lifetime catastrophe. I do not recommended timing your home purchase on once in a lifetime events or praying for disaster to buy a home
2) Going back to my point earlier point that real estate always increases, home prices have since regained and surpassed value lost. There is simply not a foreseeable future where real estate will go back to prices of 15 years ago
IS IT THE RIGHT MARKET?
Most often, when we as buyers ask, “is it the right time to buy?” what we really want to know is “can I get a deal right now?” We’re trying to figure out whether we’ll get a better deal by buying today, or waiting.
This is called “timing the market.” And I’ll let you in on a little secret: it’s not an effective strategy.
Not only is the market IMPOSSIBLE to predict, but there are pros and cons in every market. Let’s talk about the pros & cons of each. There are two types of markets: a buyers market and a sellers market.
A seller’s market happens when prices are increasing, homes are selling quickly, and there are more buyers looking for home than there are homes for sale. When this happens sellers have the negotiating power because they have plenty of buyers to choose from, so if one doesn’t work out, they can move on to the next.
YIKES! Sounds, kind of brutal, right? Why would anyone buy in a seller’s market? Glad you asked. Here are some of the pros:
- Interest rates tend to be lower during this market, so you’re paying less for your home over 30 years
- Prices are appreciating in this type of market which means that the home you buy today will be worth more soon after you buy it. You will immediately begin to accumulate equity and wealth
- Real estate cycles are long, they can last 5-10 years. This means that if you are in seller’s market, it could take 5-10 years for that to change. Unless you’re willing to wait a decade, it’s important to buy ASAP in a seller’s market because the longer you wait, the more you’ll pay. Prices in sellers market’s move like this (show increase). You want to catch it here, instead of here
The second type of market is a buyer’s market. This happens when prices are plateauing or declining, homes are taking a long time to sell, and there are more homes to choose from than there are buyers looking to buy them. When this happens buyers have the negotiating power because they have plenty of homes to choose from. If one doesn’t work out, they can move on to the next.
This sounds amazing, right? Why wouldn’t a buyer want to buy in a market where they are the shot callers?
Glad you asked. Here are some cons:
- If prices are plateauing or declining in one of the safest investments and most desirable assets in the world, it means something is going on with the economy at large. Home prices don’t decline when the economy is doing well. If you’re buying in a buyers market, you are buying amidst economic uncertainty, high rates, or some other market problem. Most people I know do NOT feel comfortable making such a huge purchase when the economy is wobbly
- If you buy while prices are declining, you run the risk of being underwater. If prices are doing this, and you buy here, there’s a possibility you’ll end up here, owing more on the home than it’s worth
So you see, there are pros and cons in each situation. It’s about what matters most to you. My personal perspective is that it makes sense to buy in a seller’s market if it’s your first home so you can take advantage of appreciation and equity. Plus, seller’s markets typically happen when the economy is strong, so as a first time buyer, you’ll feel more certainty and security during this time.
It makes sense to buy in a buyer’s market if you’re a repeat buyer or investor. If you can hold on to the “deals” you got until the market appreciates again, this is a great time to buy.
A buyer’s market is best for someone can weather depreciation and is comfortable making moves during a bit of economic instability.
Is It The Right Time Of The Year?
So, if you have determined that yes you can afford a home, and yes the current market makes sense for you, the final consideration is the season of the year. Have you ever heard “it’s the Spring buying season” or “wait until Spring” The hype around Spring is a whole vibe for sure. But, it doesn’t matter as much in Southern California as it does in other parts of the country. If you have to shovel snow to make it out of your drive way, yes, it’s likely you’ll wait until Spring to go home shopping. Here in SoCal with our mild weather year round, it’s not as relevant. The Spring market does tend to have more inventory available, more homes to choose from, but also more buyers to compete against. If you are pre-approved for a home loan, and the right home comes on the market in the Winter or Fall, there is absolutely no reason to wait for Spring.
Winter and Fall have the added benefit of having highly motivated sellers. Only highly motivated buyers and sellers stay active during this “off season” so you’ll be in company of folks who are ready to make a deal.
My personal opinion? All seasons are good seasons to buy in SoCal. The tiny advantages from one season to the next are not worth waiting for.
Spring 2023
At the time of this recording it is Spring 2023. We are still in a sellers market. There are more buyers looking for homes than there are homes for sale. Despite what news headlines would have us believe, homes are still selling at list price in under 30 days in most neighborhoods in SoCal.
This Spring Season has the added benefit of a temporary dip in interest rates which will increase affordability for buyers and the launch of new assistance programs to help first time buyers achieve home ownership such CalHFA’s “Dream for all shared appreciation loan program” which gives buyers 20% downpayment.
The two perks make it a great time to buy.
We talked a lot about timing, but are wondering what your home is worth? Click on the links below for an instant report of value or an in-person evaluation.
I’m Melissa Urena, Long Beach local and SoCal Realtor. I specialize in helping homeowners like you upgrade from first home to forever home. For more tips on buying and selling, make sure to reach out to me!
Watch the full video of today’s blog post here
Click on the link below for an instant report of value or an in-person evaluation.
What your home is worth *Links can also be found in description on youtube video.
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