Oh no! Interest rates are 7 percent! That's so high!
Actually, it isn't.
According to the Federal Reserve Bank of St Louis, the average 30-year mortgage from 1971 to 2023 has been 7.74 percent, with the highest rate being in October 1981 at 18.63 percent, and the lowest of 2.65 percent in January 2021.
Let's get to the truth.
Home inventory is very low right now in many parts of our country. Here in the Las Vegas Valley (which includes Henderson and North Las Vegas), there are around 3,500 single family homes and just under 1,000 condos/townhomes for sale as of this writing. That's about 18 percent less single family homes than this time last year, and about 9 percent less condos and townhomes. With a population of over 2.2 million people, that's not a lot of inventory.
Inventory did increase consistently from July through October last year, when we peaked at just over 8,000 homes, and then started slowly decreasing each month to bring us back down to this level.
How do you decide if you should buy?
Are prices going to come down? Historically, home prices always go up, with a few exceptions like the crazy bubble that crashed the market in 2008. That was a combination of lax mortgage lending practices and a lot of people looking to make a quick buck. I don't see that happening again anytime soon. You can't just walk into a bank and get a loan without being fully qualified since that fiasco, and that's a good thing.
With inventory low, sellers have the edge and are not budging on their prices. If inventory increases, sellers might come down, or offer closing costs to assist buyers, but prices have increased enough that even if they do reduce their prices, the homes will still cost more than they did a couple of years ago.
But if inventory goes up, won't prices come down? Supply and demand, market conditions, economic factors, quality of the home, investor behavior all play a role. As tempting as it is to assume a direct correlation between inventory and pricing, it is more complex. You won't see a drastic change overnight. Markets shift gradually most of the time. Plus, the average home buyer stays in their home 10-13 years or longer. No crystal ball is going to tell us what the market will look like then, but the expectation, based on historical data, is that your home will be worth more than what you paid for it.
Shouldn't I wait for interest rates to come down? You can, but again, no crystal ball that can tell us if, or when, that might happen. And if it does, imagine how many other people are thinking just like you.
What if inventory doesn't go up and rates come down? Now you have a new challenge, bidding wars!
If you buy now and interest rates come down, you may have an opportunity to refinance at a lower rate. If you wait and buy when rates come down, prices have likely gone up, wiping out any potential savings, including the equity you could already have.
The bottom line, in my opinion, is it's best to buy when the factors are right for you. If you can afford it, it's better to buy now rather than later.
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