We have all been there and asked the same question to ourselves and to our friends, peers, and family about the timing to buy real estate. The answer is relatively simple. The best time to buy real estate is when you can. There are different groups of people ranging from the first time home buyer to the family upgrading to a second home to the avid investor. One of the goals of all these groups is largely the same and that is to build equity over time in order to get more financially independent. This article will focus on the first time home buyer, though some instances will apply to all concerned.
Take the first time home buyer who is currently renting. Living in the Bay Area, if you are single or have a small family where rents are skyrocketing, and no doubt will keep rising, waiting for the right time to buy or for the market to change could turn out to be the most expensive part of the buying process. These are the open closing costs that are never-ending and hidden in plain sight called Procrastination. If one is on the fence and paying rent, all that money is going towards someone else’s equity, not theirs. Once they have the 10-20% available for the downpayment, they should seek to find the right property and start building equity for themselves.
Most do not understand that given today’s mortgage rates, buying is cheaper than renting. If you have been paying $4000 for a home in the bay area, it amounts to about $252,000 over 5 years OR $ 531,000 over 10 years ( I am assuming a 2% return on the investment of periodic contributions over the time period and it is to portray opportunity lost toward the contribution of equity in real estate that is owned). Besides paying rent, most do not understand the amount that they are going to be able to save on their income taxes with the mortgage rate interest and other deductions if they buy (Call your CPA or tax professional). Instead, if one chooses to buy a home worth $900,000 with a 20% downpayment, the monthly mortgage with today’s interest rates is approximately $3500 and the pride of homeownership comes along with it. Of course, there will be other conditions one needs to comply with.
Let’s do a what if analysis-what if one or both spouses are laid off? Will they have to stop paying rent? No. At that stage, will they qualify for the loan they are seeking? No. Can they move into their own home and build equity over time? No. Will they be able to continue renting and own nothing? YES. Also, there are plenty of buyers sitting on stock options where they have enough to cover the downpayment, but timing the market has its own set of issues. I still come across first time and second-time home buyers at my open houses and networking events that rue the missed opportunities of 2009/10 for buying their first home or a second investment property, and everyone wishes they had invested then. However, people have taken time to recover and while some did get into the market, several still remain in the renting mode.
Please feel free to call /message me anytime to help you with your real estate goals.
408 478 5396