Barbara Corcoran is a famous real estate investor, brokerage founder, and star of the TV show Shark Tank, and she recently posted the below IG post explaining why now is a great time to buy.
Her main point: Buy now while rates are high because when rates fall the market will be far more competitive, as new buyers will swarm the market in response to lower rates.
I might add that the post is also fun to watch because we get to see Ms. Corcoran pretend to adjust her flowers in her entryway when she has probably not done anything of the sort in reality for at least 30 years.
View this post on Instagram
What Ms. Corcoran Is Missing!
But, Ms. Corcoran is missing the biggest reason of all to buy now: The cost of waiting – and that cost can be huge!
That cost comes from missing out on fairly significant appreciation.
Please see the chart below titled “Home Prices Turning Higher” – stolen shamelessly from the MBS Highway.
TLDR: The big data services like Case-Shiller, FHFA, CoreLogic, and Zillow are predicting annual home price appreciation rates of anywhere from 5% to 10%!
So, if someone were to buy a $500,000 home now, they could reasonably expect that home to appreciate 5% to 10% over the next year, or 7.4% if we use an average of the five indices set out below.
Hence, if someone waits a year to buy that $500,000 home, they are effectively giving up 7.4% of $500,000 or $37,000.
BUT – here is where it gets better. If that person puts down 10% or $50,000 to buy that home, she will effectively get a return of a whopping 74% against her down payment funds from appreciation.
And this illustrates the magic of leverage: the appreciation is against the entire home/asset, but the buyer is only out of pocket $50,000 (leverage referring to the fact that she is borrowing $450,000).
And once again, when rates fall next year, which is extremely likely based on my Monday blog – There Will Be No Soft Landing, today’s buyers can simply refinance and be that much better off.
Home Prices Turning Higher (from MBS Highway)
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