Two of the most common questions I get asked in a hot market. We just went through in a slow market when we had the recession. And those two questions are, is this a good time to buy? And this is coming from the buyers. And the second question they ask is when is a good time to buy? In this video, I’m going to explain to you when is a good time to buy for you. Or is this a good time to buy for you? So stay tuned.
First of all, if you are thinking about buying a house and you have made the decision of buying a house, I wanted to congratulate you because the toughest part of buying a house is making the decision to buy. So either you are making a decision to buy or you have decided to buy whether in two months or a year. So congratulations. So in a nutshell, my simple answer to either of those questions is you buy when you are ready, willing, and able to buy. When it comes to buying a house, what I’ve noticed, and what most realtors notice is the buyers and even sellers who want to sell and buy is they play a chasing game. Most of the buyers and sellers play the chasing game, which means they’re chasing the market. What I mean by that is they always wonder when is the best time to buy. Because obviously, if I’m a buyer, I want to buy the best house at the best price in the best location. So we’re looking for the best deal out there. So what we end up doing is we chase the market. Let me explain to you what I mean.
Back in 2008, during the housing crash and the recession, prices were very, very low in 2009, 2010. And here we are, buyers asking us when is a good time to buy. They know the prices had dropped, there were foreclosures everywhere, there were short sales everywhere. Yet they’re asking, when is a good time to buy? Prices are down in years and years and years and you’re asking us these questions, when is a good time to buy? Because the prices were down. They were actually waiting for the prices to go down. But two or three years later, I had some buyers wait and chased the market, which means they were waiting for the prices to go down and down and down. Even though they were down from 2011-2013, prices started inching up, they still did not buy. All of a sudden, in 2014-2016, prices had gone way up from the 2008 recession prices, and some of the buyers were left hanging loose. They did not buy and they regretted it.
I had two buyers, good friends of mine, in 2017, said that “Hey, prices have been going up since 2012” and they were monitoring for five years, prices were going up. And now they were ready in 2017 to buy. But they told me, “You know what, prices have gone up in the last four or five years, in 2012-2015. Now it’s 2018, prices are going to go down”. Yes, they think they are real estate gurus. Even I don’t know when the prices are going to go down. And I’m in the real estate market, sell a lot of homes every year. So 2017, they did not buy. These were two buyers that I know. But I know there were thousands of buyers out there chasing the market. 2017, they did not buy. Guess what happened in 2018-2020. Prices skyrocketed. They still could not buy. So what, they could have bought in 2012, 2011, now they were going to pay double the price on homes because they were chasing the market. They were not deciding to buy. Let’s go back to 2023. It’s march today. 2023. Prices have really, really jumped high and they seem to have stabilized. And people ask us today, or buyers have asked me, and I know a lot of other realtors that I talked to are asking the same question in this market, is this a good time to buy or should I wait? But that’s a great question and I’m going to analyze it. How to decide to buy? But the thing is, how do you know that the prices are going to drop 10-20 percent? We don’t know. The market was slow summer of 2022, market was slow in the fall of 2022. We have seen a pickup in 2023, February, and March. In fact, last week, a lot of the agents are reporting that there are multiple offers out there. Again, even at six and a half percent at 7%. So is the market going to drop? Buyers I know are waiting for the market to crash.
I have good news for you, or maybe bad news for you. The market is not going to crash anytime soon. It may crash later, but it’s not going to crash. And statistically, if you look at the NAR, National Association of Realtors, prices have dropped anywhere from one to 10%, depending on certain areas. But in certain areas, according to NAR, again, prices have jumped five to 15% in some areas. So the market is not dropping. So the question is, should you buy now or should you wait? That’s a great question. Don’t chase the market. So let us analyze the ready, willing, and able-to-buy scenario.
One thing about buying a house, there are three advantages:
1.) You are paying a fixed amount. If you are renting, your rates will change. But when you buy a house and assuming you have a fixed interest rate for 30 years, you have fixed payments.
2.) Your wealth will grow because every year, on average, home prices appreciate at 4% per year. And you’re building equity. Every time you make a payment, you’re building equity.
3.) It’s one of the biggest investments you will make as far as the house goes. So it’ll make you frugal instead of spending $10 or $5 on coffee and donuts, you’re going to start saving or stop using those kinds of expenses because now you have a house payment, you have maintenance, and you have mortgage payments. So you’re going to become frugal, which will help you build wealth faster than if you are renting.
So let’s get into a willing buyer.
What does ready, willing, and able mean? The question is, are you ready to buy? Once you have decided to sell, in your mind, are you ready to buy? So if you’re ready to buy now, what does it mean? Ready means I have the finances, I know where I want to go. I want to move to my mom’s house or closer to her, or I’m getting a job, relocation, I’m getting a promotion, I’m ready to move from this dumpy area to a better area. Or I want to move near the beach because it’s nicer. Or you want to move away from the beach and go towards the mountains because you like hiking and you don’t want the beach access anymore. Or you want to move to your church closer to your church. Or you want a bigger house or a smaller house that you have currently right now.
So are you ready mentally to make that move? And if you are ready, you’re one step closer from the three steps that you need to know to move to buy a house or to decide to buy a house. So if you’re ready, that’s a great step.
Then the second thing is, are you willing to buy? So what does willing to buy mean? Willing to buy means this is 2023, right? And the prices are high. We know that. Interest rates are high. We know that.
But are you willing to pay the price? Are you willing to make the commitment for a 30-year mortgage despite the higher interest rates? Are you willing to pay the price of a million-dollar house that was selling for $900,000 a year ago? Now it’s a million dollars? Are you willing to pay that right now? What if you think, “What if I wait a year and the house is worth $900,000?” Do you want to pay extra rent for one year? In Orange County at average, rent of three or $4,000, you are going to throw away $50,000 in just rent. That’s half your down payment. So are you willing to make the commitment to give the down payment, to pay the price, the current price, to move, and have the hassle? Are your kids ready, assuming you have kids and they’re going to school, if you move, they’re going to be upset? I know my nieces and nephews, some of them were upset when we moved or when they moved because they were going to miss their soccer team or baseball team. You may be playing golf and you’re going to move your golf buddies or you may be a basketball player and you’re going to miss them when you move. So are you willing and ready to let go of those situations? That’s the second step in buying a home.
So let’s go to the third step, which is very important is, are you able to buy a house? What does that mean, am I able to buy a house? Of course, I want to buy a house. What do you mean “Are you able to buy a house?” Well, let me explain, “Are you able to buy a house” means if somebody calls me today, a buyer calls me, hey, Mike, I saw your sign or I saw you on Zillow or I saw you on the Internet, I want to buy a house. I will talk to him and have a great conversation and I will make sure that one of the questions that I do ask is “Have you talked to a lender or are you willing to talk to a lender?” So you know how much down payment you’re going to need depending on where you’re going to move and how much the house is going to cost you. And number two and very important is will you qualify to buy the house? And if they say, “Hey, if you buy a house for a million dollars and you put 20% down, your payment is going to be $6,000 or $7,000 a month for the next 30 years.” Are you able to make those payments? That’s the critical question.
So the commitment or to be able to buy a house, you need to have the down payment. If you’re putting a down payment, if you’re VA, you can put 0% down. If you are a first-time buyer and struggling to come up with a down payment, you can always go with an FHA loan, which is a government loan where you only put three and a half percent down. And sometimes, now that we’re getting to a different market, you can ask the seller to pay for your closing cost. So when you say you are ready, willing, and able to buy, the ability to buy is, are you qualified to buy? Can you make the payments for 30 years and get a loan from the bank or a lender? Do you have the down payment? Not only for the down payment, 10% down,20% down but there is other closing cost. There are moving costs. Once you move in, you may want to buy some furniture or appliances, or you may want to do some landscaping, work in the house. Or if you’re in a townhouse, you may want to paint and change the carpet. All that costs money. So do you have that money set aside? Are you able to buy? So you can see that buying a house is a combination.
Despite the fact that houses may go down, it may go up. Are you willing and hope you are willing. Are you ready right now? And are you able to buy? So if those three things are working with you, our alignment are in alignment with you right now, then this is a good time to buy. This is the right time to buy for you. It may not be the right time to buy for me because, hey, I had medical bills and I have the down payment. I want to move, but my credit is bad. I have to wait six months for my lender to buy a house. So I’m not able to buy right now. Now, one thing you may ask is, okay, I’m ready, willing, and able to buy. But what about the market? The prices are so high. What if they drop? You’re right, they may drop. I remember when I bought my house way back in the 90s, could barely afford it. I bought a house for $220,000, a nice house in Anaheim hills. After six or seven years, the value went up to $400,000. I was so excited. But when the recession hit in 2008, guess what? My home price dropped by $100,000-$150,000.$250,000. But guess what? 15 years later, after the recession, my house has tripled in value. So yes, when you buy a house, your prices may drop. But if you’re planning on staying in the house at least seven years or more, it’s guaranteed that the price of your house that you paid will be more.
Statistically and according to the National Association of Realtors, an average home appreciates 4% per year. In the long run, that means, let’s say you buy a house for a million dollars today, it’ll be worth triple the value in 30 years. Statistically, it’ll gain 4% per year for 30 years on average. Of course, it may go down. So maybe if you buy a house for a million dollars today, it may drop to $800,000 if the market does crash. But it doesn’t matter. You are staying there. Your payments are constant. And if you stay for another seven-eight years, it will come back up to a million, if you stayed there for 30 years. And the other question you may ask is, the rates were 3% when I could not buy when I was not ready, willing, and able to buy. But now they’re 7% and I’m ready, willing, and able to buy. Well, 7% is high. Yes, compared to 3%. But in the 80s, did you know that homes were selling and people were buying homes at 12%-18% interest rates? Yes, they did. Guess what they did. After one-three years, they refinanced it. So in this case, if you don’t want to pay the 7% rate, you have choices. You can get interest-only loans, which I personally don’t recommend, but you could get variable interest rates, where you can drop your interest rate from four to five to five and a half percent. I’m just giving an example. So your interest rate drops or your payment drops, and you can refinance and get a fixed rate. Or if you’re making the money right now, if you’re qualified right now, if you have a job right now and you’re ready to move, pay the 7% interest rate, and then you can refinance when the interest rate will drop. And I know the Feds are doing everything they can to drop the interest rate. They may go up temporarily to 5%, maybe even 8%. So they can drop the inflation.
Once the inflation drop, usually the interest rates drop. They go hand in hand. So when they drop, you can always refinance it. So if you think long term, if you think logically, when is a good time to buy? Or is this a good time to buy? Ask yourself these questions am I ready, willing, and able to buy? Then this is the good time to buy. Think about this. I just mentioned earlier that in the last week or so, people are buying homes in open houses. There are 100 groups again. Yes, I’m talking March 2023. There have been multiple offers in Orange County from our office in Yorba Linda Anaheim hills on million-dollar homes. So buyers are smart. Why would they pay 6%, 7%, and multiple offers? Homes are even selling over list price. Just last week, March 5, 2023. No kidding. So those buyers are not dumb. Those buyers are ready, willing, and able to buy, even in this market. Maybe in your situation, you are not ready. So maybe you want to wait six months. But if you are ready, willing, and able to buy, go ahead and buy. You will stop paying rent. If you buy, your payments will be fixed. You will start building equity. You will have appreciation, you will have tax write-off. You’ll start the clock of paying your 30-year mortgage today instead of three years later. So all you have to look for is real estate growth and wealth. One of the biggest investments buyers make is their homes. And buyers have 40 times more net worth than renters. So which would you want to be? Renter? Who is not ready, willing, and able to buy? Or are you a buyer, ready, willing, able to buy now despite the market conditions? Please give me a call if I can answer any questions. Thank you.