Should my wife and I buy now or wait.

Question

Wes Blackwell · Answer

@Andy Thao

A lot of new investors here on Bigger Pockets know that property values were at their lowest in 2010-2012, and since the market has gone up quite far since then they are afraid to buy now for the worry that we may be heading into another bubble and the belief that they should wait until the next recession when prices are super low again.

Peaks in land values typically happen every 18 years. Aside from major economical events like the Great Depression, World War II and the Oil Crisis, this is a pattern that has been happening like clockwork for the last 2 centuries. See below:

Right after the few hiccups in the 70's and 80's, we went right back to the 18 year cycle. If it repeats again, we won't see the next peak until 2023-2024. But even if the market starts to soften sooner and the peak comes earlier, the next low point won't be until the mid 2020's for sure. Remember that it was six years between the peak of 2006 and the lows of 2012 last time.

So, here's some food for thought... at $250k with 5% down and a 4.5% interest rate, your monthly mortgage payment will roughly be $1,800. And let's just say that your current rent is also $1,800 for easy numbers and for this example, because with the projected rent increases of 10% this year and 8.5% next year you will be paying that soon enough.

If the next low point doesn't come until 8-10 years from now, to that point you'll either pay $1,800 per month on your mortgage or somebody else's. Which would you rather have spent? ~$22,000 per year on your own mortgage or somebody else's? At the end of 10 years that $220,000!

If you buy now, you'll still have the opportunity to sell near the peak and likely make a small profit, or you can move out and rent it while you purchase the 2nd property at the next bottom. Or you can live in it long term and sell 15-20 years from now. The options are endless.

If you're STRICTLY an investor looking for the highest possible gains, then perhaps you are willing to wait until the next recession. If you're a renter trying to decide whether or not to buy, you will be much better off buying now rather than waiting.

All of the young millennials I know now who are sitting on the fence about it are thinking way too short-term. In just two years their rents will be 20% higher, interest rates will undoubtedly be higher, and homes will costs 7-14% more than they do now. But it will be too late, they'll be priced out and be forced to pay ever-increasing rents until the market drops again. Don't be that guy lol.

Ryan Landis · Answer

@Andy Thao if it is for a primary residence as @Roman S. brought up your hold time is pretty key. Also, what everyone forgets about on BP, is what you are buying it for (schools, kids, family, etc.) all get factored into primary residence purchases. As others have said, don't buy the most expensive house on the market right now (probably not a great idea). But, if you buy a house that needs a little bit of work, make sure you factor in how much equity you will truly "gain" by doing the work yourself vs. financing in everything at 96.5% LTV if you are going the FHA route and using your money for other investments instead.

If you are open to it you should also consider a 2-4 unit if you are going to use an FHA loan.

Thomas S. · Answer

With investment properties when you buy can be a big issue however a personal home is not considered a investment, it is actually a liability in many ways, it is a lifestyle choice so it really doesn't matter when you buy. In the end, in most areas, it will cost you far more than it will ever be worth and will be much more expensive than renting.

Diane G. · Answer

@Andy Thao

I am in a similar boat as you, and I have been researching the last 3 months, and my conclusion is that I will keep looking (always looking) but I will wait until Q3 2017 to decide when to pull the trigger... So no purchase for me until after summer this year...

People here will tell you always deals in any market, but that is for the pros, not for layman like you and me.....Lol

I bought at the previous peak back in 2008, and I also bought in 2012.... Difference? I bought a $700K house in 2008 and worth $1.3M now... i also bought a $350K in 2012 and worth $750K now....Conclusion - if you buy right, you can buy anytime and make money over the long haul, but timing the market is still worth it... patience pays off...

Alexander Felice · Answer

If it's a primary residence, just buy it now while rates are low. Any market fluctuations will be largely irrelevant over ~5-10 years.

You can't make cash flow on a primary but you may make appreciation, try and buy in an area that will grow.

Diane G. · Answer

@Andy Thao

Bay area home prices are heavily coorelated with stock price, and I expect some sort of pull back of stock price soon... hence the wait

Franco Li · Answer

If you are buying a primary residence, rates are going to get higher w/o a doubt so I recommend you look for financing right now that works for you - if you have a plan in mind already. If you are looking for rental investment, well then 90% of the work is making sure you have appropriate leverage and making sure the strategy works, so it doesn't really matter when/where you go; only how much money you can make! Best of luck.

Gordon Cuffe · Answer

@Andy Thaowe have to assume your asking if you should buy a primary residence or not. If that is the case then yes if you can find something that you like in your price range. Every year you wait is another year losing out on interest tax deductions, and loan principal decreasing. You could look for something that just needs updating to try to get it at a bargain so that you have equity once you update no matter where the market goes.  If you ever have financing questions, send me a email and I will answer them.

Should my wife and I buy now or wait.

Most Popular Reply