Many articles have been written recently about why it's not a good time to buy a home now. Here are the the most common themes and my argument against them:
1. Prices will come down!
This is possible, yes, and in some areas they have already. Timing 'the bottom' is always difficult. So if prices have come down, being able to select the best property at a fair price may still be better than buying what is left over once prices really hit bottom and the markets are much more competitive. With fewer buyers in areas, your ability to negotiate is stronger now (in several areas around 7%). If you're renting now at $4,000 per month, while buying would cost $5,000 per month, over three years you will have spent about $150,000 on rent (assuming 2% annual rent escalations). In those same 3 years you'll have grown your equity in the home, and benefitted from the mortgage interest and real estate tax deduction. What if you are wrong about prices coming down in a super-low inventory environment? What if they stay the same....or rise? All areas are different....
2. Rates are so high and heading higher!
This is true and they will probably go higher. And more than likely they will dip too over time. Securing financing now may be easier than later if bank requirements are tightened....or if you lose a job. Rates will rise and remain higher as long as inflation is higher....which also implies that everything needed to build a house including labor will cost more too. Combine construction down with a decade-plus of under-building: when the economy rebounds, the demand vs. supply ratios could be much, much worse, triggering price hikes and more multiple bidding over (higher)asking prices.
3. A recession is coming!!!!
That is a certainty, and it always is, but that may or may not happen a month from now, a year or several years from now. In a recession, unemployment usually rises, but even really bad recessions have about 10% unemployment which means 90% remain employed, earning and spending, and 100% of everyone continues living. Life does not stop in a recession. Growth slows and decelerates. Everyone has to live somewhere. Rents are high too. Demand to rent actually grows during most recessions. Recessions also usually deliver lower interest rates as the FED tries to stimulate more borrowing and growth.....which could allow you to refinance and lower your mortgage payments too.
Our obsession with short-term thinking and headline-making often delivers an enormous price at the expense of calm, rational thinking.
SOURCE: Leonard Steinburg