Why 2015 Offers a Golden Opportunity for First-Time Home Buyers
There is something of a “perfect storm” buying opportunity brewing in the U.S. real estate market today, especially for first-time home buyers.
In my thirty years in the real estate industry, I have never seen anything like it.
I am not a Realtor anymore and I have no dog in this fight; I am simply reporting on the factors that make for an incredible buying opportunity.
1. Supply Is Increasing
The horrific downturn of the recent past resulted in an astounding loss of equity for homeowners. That meant millions of people found themselves frozen into their existing homes because they lacked equity with which to move up to something else.
That is all changing now as owners get re-equitized due to a steady rise in home prices over the past 24 months. These re-equitized owners will start selling and moving up.
As a result, 2015 will bring a larger supply of homes to the market in the first-time buyer price range. This increased supply makes for better buying opportunities at relatively moderate prices.
2. Investor Demand Is Diminishing
The rebound of 2013 brought institutional investors out in droves to scoop up deals.
Hundreds of millions of dollars poured into residential real estate as investors gobbled up any available inventory. Frustrated first-time home buyers were constantly out-bid by all-cash investors.
Those investors were bottom-feeders and their ranks diminish dramatically each day. This attrition should create less competition for moderately priced homes.
Think about these first two components: higher supply and lower demand. The net affect is a stronger buying opportunity.
3. Mortgage Financing Is Easier to Obtain
After years of ridiculously restrictive mortgage limitations, the banks finally remembered that they make money only when they lend it. Mortgages are (relatively) easier to obtain now compared to any period post-2008.
While banks are not lending money to anyone who can fog a mirror (thankfully!), they are demonstrating a much greater willingness to work with qualified home buyers.
4. Interest Rates Remain Incredibly Low
We have come to believe that a sub-5% interest rate is some sort of inalienable right.
Just because something has been around for a while does not make it normal. The average mortgage rate over the past 30 years is still around 9%, with an all-time high of about 18%.
Low rates simply cannot last forever. So, those who buy a home with a 4% mortgage rate today will be smiling broadly years from now.
5. Rents Remain Astonishingly High
Finally, monthly payments on a mortgage are lower than average rent prices in most cities. (It is the down payment that is the sticking point for most buyers.) This is especially true when you factor in mortgage interest deductions.
There is no sign that rent prices will diminish any time soon. High rent makes buying a very attractive option.
There is, of course, an inherent risk when making any major investment, and any first-time home buyer should consult a competent real estate professional.
Nonetheless, when you weigh all the factors of buying, the scale offers one piece of advice: BUY NOW!
