I’m often asked if I think it’s smart to buy a house.
In a word, I’d say “yes,” but with the caveat that while I believe residential real estate is nearly always a sound investment, whether it’s the right investment at the right time is a highly individual decision.
I think the most important question to ask is “Why?”
What’s your motivation to buy? Is it because you’re in a job you love and a community you love and you want to settle in for a while? If that’s the case, then investing in a home now is likely a good plan. But if you’re thinking you’ll move in a year or even a few, renting is probably a better option than buying when the market is still high.
Tips For Buyers
In my opinion, the housing market is likely to stay in favor of sellers for a while. Given this, here are a few tips to make the process a little less stressful:
• Work with a good real estate agent. In the spirit of full disclosure, my wife is a real estate agent, but this isn’t simply a bias in her favor. In a heated market, an experienced agent will know about homes as soon as they come to market and have insight into how neighborhoods are trending. And while no one can predict when a market is topping out or about to sink, good agents know the nuances of price velocity and sales volume well before this information is reflected in housing reports because they’re deeply connected to this daily, whereas housing reports are typically 30 to 60 days behind.
• Be realistic and firm about what you can and should spend on a home. With mortgage interest rates low and competition high, people are stretching housing budgets. If you end up on the highest end of yours, will your home make you happy enough to overcome all the other things you may have to give up, like vacations or dinners out? And will you be able to afford the maintenance and upkeep, which will add to your costs over time?
Hot? Cool? Confusing? How To Win As A Buyer In Today’s Housing Market
Although a lot of attention is paid to the astounding home prices we’ve seen in the last 18 months, the shift to a sellers’ market started long before we heard the word “Covid.” For years, builders lagged on construction and interest rates were held at or near historic lows — and then, just as they entered their late-30s and even knocked down the door to 40, Millennials did what we thought they’d never do: bought houses.
Even if the changes were incremental, the data shows that the steady uptick in home prices had been underway for about a decade. That said, like everything else, the pandemic exacerbated the inventory shortage and accelerated skyrocketing valuations.
That we’ve landed in a sellers’ market isn’t a surprise. And even with a lot of competition, I still believe that it could be a good time to buy.
Here’s why and how to come out ahead.
Residential Real Estate: Late-2021
Today’s residential housing market is still challenging for buyers as demand continues to outstrip supply, but there are a few reasons why things are settling a bit:
• In a bid to cash in, more sellers are listing their homes. While the competition is still fierce, it doesn’t seem to be as drastic as the last year or so.
• With autumn comes a cyclical and seasonal cooling period for buyers — at least, that’s how the industry has functioned in most “typical” years. Granted, this time is still anything but normal, but with many children back in school, I’m willing to bet that parents who were in the market won’t disrupt their kids in the midst of a new school year. Instead, they’ll wait until next spring to jump back into the fray.
• Many people are opting out of “buying up.” Instead, they’re “commercializing” their existing homes by adding offices, treehouses, pools, gyms and more to meet their needs and desires. Whether this trend continues is hard to say, because just about everything hinges on what happens next with Covid-19.
Do your due diligence. Make sure a home is where you want to live. You can always improve a home, but it’s a lot harder to improve a neighborhood. Consider longer-term aspects, like schools, if that’s relative to your future. Be honest about how much time you want to spend on home maintenance, too — be prepared for upkeep or to hire someone else to do it. And while you never really know a home until you live in it, an inspection can bring to light a lot of expensive issues, so don’t skip it!
.Mike S. Shapiro, Chairman HOM Real Estate Group, Co-Founder + Managing Director Plunk, Forbes Author + Podcast, Speaker, Mentor, Investor