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Don’t Stay Put

Leo Anzoleaga column: Buying a new home still is a solid long-term investment

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Mortgage Rates

The headlines are terrifying and sticker shock is everywhere. As a homebuyer, you have every reason to be frightened to jump into this scorching hot housing market. Low inventory, historically high home prices and interest rates that doubled since 2021 are just a few reasons you might be sitting on the sidelines and staying put.

But you might be like many Americans who are in desperate need of a new home. Maybe the upcoming college drop-off reminds you it is time to downsize and embrace being an empty nester.

Conversely, maybe the bunk-bed solution and piles of toys across the house aren’t cutting it anymore for your growing family. You might be ready for a better job closer to the city, or your upcoming retirement might give you the chance to relocate somewhere warmer.

Whatever the reasons are, you are ready to make a move, and news about the housing market is stopping you in your tracks. You tell yourself that you can wait out high inflation, inventory shortages and increasing interest rates.

Let me be the first to tell you: Waiting it out is a big mistake most prospective homebuyers will regret.

This year, mortgage rates breached 6% and the housing frenzy still is overwhelming buyers and real estate agents across the country. When you see statistics about lower housing contracts and sales this year, it’s not due to lower demand; it’s due to low supply.

Potential sellers are holding onto property longer for fear of buying their next place. More people are ready to enter the market for the first time, and new home construction still is behind thanks to COVID-19 delays.

Just look at the increased number of U.S. households: The country has 14 million more than it did in 2017, and those families are fighting for 3 million fewer homes. Although this housing shortage is undesirable, it does indicate investing now in a new home will pay off during better housing markets, as our population continues to grow and housing demand remains strong.

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Right now, potential buyers also might be worried that our country is on the edge of a recession. Data suggest this will happen during the third or early fourth quarter of this year.

Once this happens, flight-to-safety will take over, and money will flow out of stocks to safer investments like treasuries and bonds. Interest rates then will drop.

After every recession, housing appreciation rates have increased. Historically, the value of a house that you buy during a recession will appreciate.

So what does this mean for buyers? You will pay more now because demand and interest rates are high. But when the refinance wave comes in early 2023, you can get a lower interest rate and monthly payment.

If you’re concerned about buying a new home in an unsteady market because a majority of your equity is tied up in your current home, you should know that isn’t necessarily a bad thing. Depending on how much equity you have, you can leverage it toward a line of credit for a down payment on your next home, while you rent out your current one.

Rents have gone up substantially over the past year. More people in the market with fewer homes means more renters are shopping, too.

It’s important to remember that rent is 100% interest. If you are willing to hold onto your property long term, you can build equity while you buy a new home that is more suited to your current needs.

Fear of entering the current housing market is completely understandable when U.S. mortgage interest and inflation rates surge. But this is the bottom line: If you need a new home and a property meets 85% of your criteria, then buy it. It’s unlikely that home prices will decrease, and your investment likely will appreciate after the recession.

Your monthly payment will be more now than it would have been in 2021. But when interest rates decrease again early next year, you have the ability to refinance for lower rates and payments.

Don’t let the news scare you. Buying a new home this year still is a solid long-term investment. If you know it’s time to make a move, then partner with professionals who understand this market and make it happen.

Leo Anzoleaga has more than 19 years of experience in the mortgage industry, specializing in helping homebuyers and their agents stay competitive in the fast-paced Washington, D.C. real estate market. He is based in Reston. Contact him at:


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