The Expert Podcast

Many people have been putting off buying a new home. Either out of necessity or by choice because of availability of inventory or pricing or interest rates but the window might be closing. For opportunities to be a homeowner. It's possible that the way the real estate market has evolved over the last 18 to 24 months has changed. The ability for a normal consumer to buy a home. In fact. The pricing of a house is just one factor. In being able to buy home interest rates or another mortgage availabilities a third. but the inventory is shrinking. Not as many new homes are being built as are needed by home buyers. Great article And money-wise today said did you buy a house before 2022? If the answer is no you will likely be on the wrong end of financial inequity over the next decade. And the reason why is because if you don't own a home, You're subject to at the mercy of landlords raising your rent every year 5% 10%, some areas 15 20 30% increases in rates even if it's only 5% a year. Over 10 years that's a doubling of rent And you might say well five times 10 years is 50% but when you compound it, it's more than double. So whatever you're paying now for rent…If you do not own a home you might be paying twice that in 10 years And you might think 10 years is a long time, but think back 10 years ago, 10 years ago was let's say 2012 or 2013. What were you doing in 2012 What was your rent like in 2012 It wasn't half what it is now. Right. So it's not that far away. So if you don't get into a home now you might be paying double for rent. In. Two…which isn't that far away. Matter of fact you might hit double before the end of the decade. Why is this happening? Why is there a shortage of inventory Well, The prices aren't going to go down Why is that Because billionaires are buying up the real estate. Any excess property that's on the market. Investors are buying to rent out because they know it's a great investment. They can raise the rent five or 10% per year. They lock in a price today even at seven or 8% interest. You're making out like a bandit. So you might look at buying a home today as being unaffordable or out of reach, but that's…based on the home You think you want to buy? If you're looking at a four or five or $600,000 house because that's the kind of house you want. You might not be able to afford that house, getting into a. Different house that you can afford. Might be a good way to go Even if it's not your dream house, how do you do that? Well look at your rent that you're paying right now. Let's say you're paying $2,500 a month. Back into the numbers on what kind of mortgage that would equal if you're paying 2,500, that might buy you a house That's two 50. 250,000 And you might say well G 250,000. I don't want that house Maybe you don't but would you rather have that house? Or have an apartment that's going to be $4,000 in six years. At the same apartment you're living in now. You might be better off getting into a house because again…Financial inequality meaning that…you're going to be giving all your money to the landlord. And in…seven years you'll be paying double for the same property, where if you buy a cheaper house than really what you think you want to get, you might be in better shape. And here's another reason why now might be a good time. Interest rates have hit 7% They're going to be at 8% soon and it's going to be harder to qualify for a home loan, because what happens is when interest rates go up your buying power goes down. They do what's called a debt to income ratio. So whatever your income is, a certain percentage of that can be used towards. Home. cost your monthly housing bill. If the interest rate goes up. Your debt to income ratio. We'll allow you to buy less of a house. So if the interest rates goes from you might be able to get 6.5 6.7 Right now, if it goes up to eight, you can buy less house in the future If it goes up to nine, you'll be able to buy even less house. So now might be a time to get in. Where you can at least buy something that's acceptable rather than having to…be out in the cold. Because that's what's going to happen to a lot of home Wanters. Not home buyers not homeowners home Wanters if you don't buy a house while the interest rates. Are still low and you might not think 7% is low Historically it is low and the prices have gone up. But they're not making any more real estate. They're not making any more property builders have shut down construction. So. Prices might seem high compared to two or three four years ago And they might seem crazy in terms of budget. But it's possible. That buying a house now even at the high price could be the best financial move that you make. People are waiting for a housing crash because one happened in 2008. But even the housing crash of 2008 didn't last long by 2011 or 12 the prices were right back up where they were before the crash within three years. And they didn't go down that much In most markets, they did drop in markets where there was a lot of speculation. Right now there is no speculation anywhere. The people who are. homes right now are paying cash. Large down payments Good credit. They're not buying. Interest only loans. And they also can't afford to walk away from their home because they have a low interest rate. So…Again nobody can predict the market. House price crash might be wishful thinking. It might not house prices could crash 20% tomorrow but even if they did. Even if they did, that would take a $600,000 house. And bring it down to about 500,000. It would take a $500,000 house and bring it down to 400,000. It's not going to cut the price in half. And that. Crash so to speak. Might not last long And when it does. Investors are going to come in and buy up all these houses You're have to bid against them and. If you wait for that crash a year year and a half, you might pay an extra point and a half or interest that might erase all of the say. you made on that house. So…where you live is an important decision. In almost every case owning is better than renting because you can build wealth You can accumulate equity over time and you're not giving your money to. A landlord…Who can raise the rent once you have a mortgage. That payment stays the same forever. Actually That's not true. At some point it goes to zero. After 20 or 30 years depending on how long your mortgage is, your payment goes from 2,500 a month to $0 a month You have a free house. Which is a good goal to get to. And you might think well 25 years is a long time. It is a long time. But…again rewind the clock 25 years. It's not that far It's at some point. You will be 25 years older than you are today. Would you rather have that birthday be a day where you can start paying zero for a mortgage or still paying rent to a landlord?