Its the question that is on a lot of peoples mind as we enter the spring season of 2023.
First let’s talk about the Cons- cuz let’s be real thats what yall are here for and that’s the obvious one
- Prices have come down somewhat since last year and the fear is that if the prices continue to go down and you buy now are you buying a house that will lose value?
The median sales price peaked last year during that April, may time at 425K and where we stand today is at about 390K. That’s a sales price difference of about 9% . So if we’re being honest prices have already come down but since last year at the peak.
Now NO ONE can predict the future- but the question is this number going to continue to come down further? That is something to consider if you are thinking of buying right now but honestly it something to think about anytime you buy a house.
The second con is that interest rates are HIGH and they are higher than they were last year and its actually a pretty big difference. Looking at this chart you can see we hit the peak of interest rates around the oct/nov time of last year.
And if you compare that even further to the previous oct/nov we are in the 2’s and 3’s for interest rates.
So why does that matter? Rates affect your mortgage payment more so than prices.
For example if you were buying a home last year at this time and you were looking the median sales price of 400K and you put 10% down and your interest rate was about 3.45% which was common around that time you’d be looking at a monthly mortgage payment of $1757 (this is not including property taxes by the way.
Now if we look at the average price today which is lower at 390k plus an interest rate of 6.15% you’ll see your payment is still higher at $2223 not including property taxes
That is a difference of almost $465 a month even though the house price is lower.
So it is great to see prices have come down since last year- but in terms of affordability on a monthly, it is still not that great compared to last year.
Which brings me to my next point if we look at affordability and its not looking so great these days. If you look at this chart it will show our affordability is at about 24%. Meaning 24% of homes sold in quarter 3 were affordable to a family making more than $126,000 per a year in the cypress area. Now these numbers are not quite to date. We don’t have the quarter for income or housing prices.
But generally we know our affordability is much lower than we want it to be. Then normal affordability index is ideally wanting to be around the 60-75% range. We see th q4 data soon- but overall affordability in these Suburbs compared to a few years ago- is still not that great.
So those are definitely cons to buying a house right now and if you wait prices might continue to go down, but will rates go down? We already saw how interest rates affect your monthly payment, but if we continue to wait, will prices go back up–especially if interest rates drop enough.
No one has a crystal ball and if you are waiting until we hit the bottom-you may not know we are in the bottom until the bottom has passed.
In the meantime, living anywhere is not free- so I imagine you might be paying someone else’s mortgage if you are not paying your own- all things to consider.
That being said lets jump into the data about the PROS of buying a house right now
Pro #1 is there is less competition on the buyers side right now
And why does that matter?
It means you don’t have to do crazy things in order to get your offer accepted on a house like waiving your inspection or appraisal and going hundred of thousands over the asking price.
Lets look at the supply and demand charts. In a balanced market we are looking at about a 6 month supply right now we are at about 3 months which is still low but much higher than we were this time las tear when we were sitting at about
Pro #2 rates are lower now
Now I know I just talked about how rates are higher than they were last year and they are but rates have seen a pretty big decline for the first time since september when we peaked last year towards the end of fall when rates were just over 7.08% we have ended coming down today to about 6.15% – so will this continue? Again I don’t know for sure but for now rates have come down which is a nice welcomed surprise for everyone to see this change because its making things a little more affordable. And although 6.15% doesn’t seem that low compared to the last couple of years…it is still lower than the longer term average rate which is around 7.76% since 1971.
So being at 6.15% we are below the long term average and seeing as we have been below the average since 2001 That being said I know home prices and things have changes significantly since the 80’s when we were seeing interest rates in the teens.
Another pro of buying a house right now is prices have softened and we have already looked at this but keep in mind prices in the cypress/katy area have dropped nearly 9% since the peak in 2022 and that is awesome to see and something you may want to take advantage of as a home buyer,
The final pro I have is that sellers are willing to be a lot more negotiable right now than they have been in a while.
If we take a look at this chart of the original list price vs the final sales price you can see we went from contract closing an average of 104% over list price to now closing nearly 94% under the list price.
So how long will sellers be negotiable on price and concessions it’s anyone’s guess but As the market starts to heat up you will see less and less of that kind of behavior.
So things you need t keep in mind when you are considering buying a house in any market
#1 How long do you plan to hold the house for? If its a primary home for you and you plan to live in for 5 or 10 years or more than that than likely your home value is going to appreciate over time regardless of the market fluctuations – so even though thing have been volatile over the last couple of years -it doesn’t mean we will continue to see that for the long term and if you hold on youll end up on top in years time.
#2: resale is not the only option right now- new construction homes over built during the peak of the last couple of years and now they are offering a lot of incentives and buy down rates in the 3-5% range- so make sure you weigh al your options
#3 keep affordability in mind- even in a lowering market make sure your income, job whatever can cover your mortgage payment comfortably. You don’t want tot be in a situation where you cannot afford the payment.