Is Now a Good Time To Buy a House?

1. According to the National Association of Realtors’ 2017 Q3 Homeownership Opportunities and Market Experience (HOME) Survey, 77% of Americans think that now is a good time to buy a house. 23% disagree.

But according to Fannie Mae’s August 2017 Home Purchase Sentiment Index,  only 55% think the time is right to buy. 37% disagree. The net “yes” response is just 18% for Fannie Mae, versus 54% for NAR. Who should you believe?

2. Every month, Windermere compiles a very informative stat called “cost of waiting”.  For instance, in August, 2016, the monthly principal and interest payment on a median-priced Seattle home was $2,670. A year later, the median price has increased by $90K and the interest rate has bumped up by 0.53%. The monthly payment on a median home is now $3,277. The cost of having waited was $607 per month – multiplied by 30 years.

But will the same hold true if we look forward to 2018 and beyond? When you buy mutual funds, their brochures warn that past performance is not a guarantee of future results. Doesn’t the same go for housing? Just ask the folks who bought their homes in 2007.

3. ATTOM Data’s Q3 Affordability Index shows that in some markets, wage growth has outpaced home price growth over the past year. Seattle is NOT one of them. In addition, as Zillow points out, our “hidden home ownership costs” (which include property taxes, utilities and maintenance) are among the highest in the nation – and will continue to rise.  For instance, Seattle Public Utilities stated in its strategic plan that the average annual rate increase to maintain baseline operations in 2018–2023 is 5.45%.

This is a problem, even if you can comfortably afford the home you have in mind. If you ever needed to move, you’d want to have access to a steady base of potential buyers. If our wage growth isn’t keeping pace with the cost of home acquisition and ownership, we’re relying on newcomers to keep the market going. But as a recent Seattle Times survey shows, nearly half of newcomers (<5 years in Seattle) aren’t planning to stick around for the long haul.

4. As of Q1, 2017, Zillow’s Breakeven Horizon showed that it would take 2 years and 3 months before it would make more sense for someone paying Seattle’s median rent to buy a house at the median price. But according to Dupre + Scott, an apartment investment research firm, 7,000 new rental units have come on the market since April and 62,000 more are slated for 2018-2020. Already rental vacancy rates are at their highest point since 2010. How will this affect transient newcomers’ break-even math?

5. No, I’m not advocating against house buying. I just think there are lots and lots of factors that you should consider. Let me know if you’d like someone to talk them over with.

Posted on October 7, 2017 at 7:09 pm
Isabel Wang | Category: Uncategorized

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