We recently addressed what we think are unjustified fears of a continued decline in housing prices, focusing on how we are in the “trough” now and how “timing the market” never works for people looking for the exact “bottom.” There are many other reasons to be bullish on buying a house now, and below are just a few:
- Big Declines Are Behind Us: Prices have fallen almost 60% since the “peak” in areas like Eastern Contra Costa County, Las Vegas, San Bernardino County, etc. Current “declines,” if any, are in the single digits. A 1% decline in value would be significantly offset by a 3% increase in rates.
- Inflation: The Fed’s continued solution to fix the economy is to pump money into the economy at unprecedented levels. We are already seeing tremendous inflation with commodities, but we will not see significant overall inflation until the economy heats up and all the new money starts to circulate. The economy will come back, and inflation will surge. This will cause interest rates to shoot way up, and housing prices to increase as well (as real estate is a hard asset and a great inflation hedge).
- Rates: If you buy a house a year from now that costs $8,000 less (2% of $400,000, for example), are you better off if rates are 3% higher? Not even close. An FHA Buyer would end up paying almost $12,000 more per year in interest! Getting LOW RATES NOW is far better than shaving a few bucks off the price in the future.
- A House is Shelter and a Place to Live: While we actually think rental housing is a great investment now, we think owner occupants should view housing the way our parents did without fears – not as an investment, but as a place to live. If you plan on living in the house, and it works for you and your family, take advantage of today’s lower prices and great rates and don’t worry about the “investment aspects” of your home.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167