Should You Buy a Home During these Uncertain Times?
With much of our future unknown, making one of the biggest financial decisions of your life can seem overwhelming. Housing is unique in that it is a basic need, often dictated by lifestyle changes: Leases end, families grow, promotions happen and kids move out. A recession doesn’t change these circumstances. Nevertheless, it’s important to weigh all options when you are considering a move.
Austin is unique in that we saw a record breaking year despite the pandemic. With higher than average appreciation rates and a world class lifestyle, the desire to live in Austin will continue.
Even with favorable circumstances in Austin, I’ve been asked, "Is now a good time to buy?" I break it all down below:
Will prices drop? This still remains to be seen. With building slowing and a decrease in current listings, supply is not there, but demand is. This would indicate that prices could stay where they are at or even rise – According to Curbed.com, “Zillow conducted a study on housing during previous pandemics and concluded that while home sales dropped dramatically during an outbreak, home prices stayed about the same or suffered a slight decrease. This makes intuitive sense because it’s harder for prices to change when there are few transactions. In short, previous pandemics have simply put the housing market on pause.”
Should I still buy?
Can you afford it? The best and only time you should buy a home is when you can truly afford it. If you have enough cash reserves in your emergency fund and can also afford a down payment, this could be a great time to buy a home. Locally, Spring and Summer are typically the most competitive times for buyers with the highest concentration looking during this time. Homes are still selling with multiple offers, but we could see some opportunities to avoid it as the majority of buyers stay at home.
Coincidently, demand may still be driven by the low interest rates we are seeing. Low interest rates can save you thousands per year and allow you to have more buying power. For example if you purchased a home priced at $300,000 with a 3.5% interest rate your mortgage with no taxes or insurance included and 10% down would be $1,213. That same home at 4.5 interest rate (where we were last year) would increase that amount to $1,368. Saving you $155 per month or $1,860 per year. This could be a great reason to buy now.
Is it safe?
Realtors in Austin are taking serious precautions to keep clients safe. I have been offering virtual tours along with neighborhood tours. If you can’t imagine not seeing a home live before putting in an offer, there are ways to safely arrange that as well. All other elements of the transaction can be completed virtually from putting in an offer to closing. Appraisers, Inspectors and realtors are also considered essential and here to help make this process as transparent as possible.
What should I do if I’m not quite ready?
Now is a great time to start doing your research so when a great opportunity to buy presents itself you will be ready.
A good place to start is by browsing online. Once you have narrowed your list down to key areas, drive around to get a better feel for what the neighborhoods are really like. Keep an eye on prices for areas you are interested in and have a realtor set you up to receive real time listing updates and pricing data. If you want to get the most accurate numbers for what the monthly payment and closing costs would look like, starting the preapproval process would be a good idea. Remember, starting the preapproval does not require you to move forward, but puts you in the best position to see what you can afford.
Interview agents to ensure that you are working with someone who knows the area you are interested in, has the tools and resources to provide the best experience and has the market knowledge to help you make the best decisions. I have been offering virtual strategy sessions for buyers looking to understand next steps and how to properly prepare.
The most important thing is that you are comfortable! In periods of crisis some great opportunities can present themselves, but if you are concerned about being laid off or not being able to afford your mortgage, it won’t be worth the headache even in mortgage rates stay low and listing prices drop.
If you are looking for the most up to date information on the Austin real estate market, or what the best strategies would be for your unique situation, I would be delighted to connect.
kimhoward@compass.com | 512.914-2873