If you’re renting and on the fence about buying, I need you to know that investing in real estate is a key wealth-building tool. Most homeowners have accumulated $100K in equity in the past decade. My husband and I have accumulated more than $100K in equity in 5 years. Home equity grows over time as the value of your home increases and the mortgage balance decreases. Consider a monthly mortgage payment a sort of forced savings account that allows the homeowner to build a net worth 40x higher than that of a renter. Simply put, homeownership is an important avenue for building household wealth.
Signs That You’re Ready
Should you continue renting or are you ready for homeownership? While this is a question only you can answer, I’d like to share a few signs that may indicate that you’re ready to make the switch.
- You’re tired of rising rent.
- You have a good credit score.
- Your debt-to-income ratio* isn’t high.
- You’ve saved for a down payment.
- Your employment is stable.
*This is calculated by adding your monthly debts, then dividing by your monthly income.
The best time to buy a house is always five years ago.
ray brown
Yes, I’m aware that everyone is talking about interest rates, prices, and inventory. I’m going to talk to you like I talk to my family! If you find a place that you love, don’t choose not to buy because of interest rates. When the interest rates go down, you can refinance your home at the lower rate. Regarding prices, it would be nothing short of a miracle for home prices to go down to what they were 5 years ago. It’s just highly unlikely.
Why? Prices are determined by recent sales of comparable properties. If every home of the same size and configuration in a subdivision sold for $550,000, a homeowner listing their home for sale is not going to have an asking price of $450,000. Why would they when the value, as determined by recent sales, is now $550,000? Multiple homeowners would have to sale for less than $550,000 to bring the market value of homes in that neighborhood down.
I’ve also heard people say they’re waiting for the market to crash (also highly unlikely), banking on foreclosed properties. The market crash in 2008 was largely due to loose lending practices (predatory mortgage lending and insufficient regulation). As a result of that crash, lending standards changed drastically to avoid a repeat. Due to stricter lending regulations, we will not see the number of foreclosures we saw following the 2008 recession. In addition, due to limited supply and high demand, prices are expected to remain stable.
Lastly, lower inventory is not as scary as it may seem. In the height of the pandemic, competition was fierce. Sellers were receiving multiple offers within 48 hours. With the market now stabilizing, buyers have a better shot at securing their dream home in 2023 than they did in the past 2 years. Lower inventory just means your search may require more time and, when you find a place you love at a good price, act fast.
If you’ve thought about purchasing a home and have not done so yet, what’s holding you back? Let’s talk about it in the comments!
[…] you’ve been here for a while, you may remember this article where I said (and I quote!): “It would be nothing short of a miracle for home prices to go […]