Happy New Year! I hope everyone had a nice and especially delicious holiday! I’m excited to be back and hitting the ground running at the Goldfinch Factory. For my first blog of 2025, I wanted to talk about buyers entering the housing market, specifically addressing the age-old question about timing.
The number one concern among prospective buyer clients is whether or not it’s the right time to start looking for their home. Everyone reads the headlines about low inventory and real estate prices rising, and the hesitation and uncertainty is understandable.
The dilemma inevitably boils down to timing the market or time in the market.
So, should buyers hold off looking for their dream home?
My answer has been and always will be: of course not! To put it more cleverly, though: time in the market beats timing the market.
While I understand a prospective buyer’s hesitation, and I know the market can be frustrating at times, buying sooner than later, when it’s affordable, is the better financial decision.
The biggest factor to consider is equity. Real estate is traditionally an appreciating asset, meaning it gains value over time. Home values have skyrocketed over the last several years, causing a lot of anxiety and frustration for wannabe homeowners while giving current homeowners lots of equity.
And while experts predict the rate of increase for home prices will slow down over the next couple years, real estate wealth will continue to rise even if not so quickly. So buyers who sit out on today’s market or stop looking can lose potential equity.
Let me give an example to help illustrate my point: let’s say you bought a home in December for $400,000. If we follow the Home Price Expectations Survey, released quarterly by Fannie Mae, your home will appreciate by 3.78% in 2025, 3.63% in 2026, 3.71% in 2027, 4.03% in 2028, and 4.12% in 2029.
Using those predictions, the potential growth in your home in five years could be over $80,000. This isn’t even factoring in your monthly mortgage payments, which bring down the overall total of your loan, further increasing your equity on resale.
Taking those same numbers but waiting one year to buy a home at the same price, you’d lose over $15,000.
Now these are only hypothetical, and even though they are predictions based on expert opinions, the numbers aren’t guaranteed. Still, real estate has for decades remained a stable and safe investment.
Of course, we must always consider affordability and wants. Entering the market and rushing to buy a home just to lock down a position to start gaining equity makes no sense. But the equity argument serves to illustrate why entering the market is sensible and financially savvy.
We’re talking about time in the market, remember? Approach the market with patience and careful deliberation. If the process seems daunting, be reassured: with a diligent and measured approach, finding an affordable home that you love is very, very possible.
One final consideration when it comes to timing is home mortgage interest rates. This, too, gives prospective buyers a pause – and understandably so. Changing interest rates by only a few points can broaden or narrow a buyer’s price range dramatically.
However, home mortgage interest rates shouldn’t dictate buyers’ timing, either. It might make your time in the market easier or more difficult depending on the rate, but it shouldn’t be a determining factor for entering the market.
For one, the equity argument still remains. Of course, higher interest rates will yield lower returns on the resale of your home, but the equity gained will still outpace any difference of savings in waiting on a lower rate.
To add to the equity argument here, you always have the option to refinance your mortgage and find a lower interest rate down the road. This option works out beautifully for homeowners: they’re able to gain equity, decrease their loan to value, and find a lower interest rate, potentially lowering their monthly mortgage costs or shortening the term of their mortgage.
Don’t try timing the market. Arm yourself and prepare for time in the market! Above all else, entering the real estate market and shopping for a home is an exciting process that’s both savvy and possible!
Wonder what’s the first step for entering the housing market? Check out my previous blog on the importance of getting a Home Mortgage Pre-Approval.
If you have any questions, or want to talk about real estate, shoot me a hello today!
