IS NOW A GOOD TIME TO BUY A HOUSE?
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My #1 Home Buyer Questions Lately... Is it a good time to buy a house?
In the video above I go over, Is Now A Good Time To Buy A House. We’re going to see what my crystal ball says about buying a house in this market.
Hello, my name’s Tyler Ford, Tucson, Arizona with eXp Realty. And welcome to this episode of Living In Tucson, Your Tucson Real Estate Connection.
In this episode, I’m going to go over the number one question I’ve been getting as to what buyers are asking. And that is, is it a good time to buy a home in this market? But the question really comes down to you, is it a good time for YOU to buy a home? And I’m going to go over in detail whether or not it’s a good time for you to buy a home in this market.
Confession To Make
I have a confession to make. I’ve been a licensed agent for over 30+ years and also an active investor. And investing in real estate at the beginning is what got me into real estate.
And my confession is… this is the most confusing market that I’ve ever, ever seen!
Back in 2007, 2008, when we had our last pullback of the market, at least we knew what was going on. We knew the reasons why and we knew prices were going down. The question is, when would the bottom hit? And so 2007, 2008, the market crashed.
Warren Buffett Interview On CNBC
And then we went down and sideways for the next five years. In the bottom of the market, on February 27th, 2012, Warren Buffett was on CNBC and they asked him, “In this market, what would you do?” And his answer was…
"I would buy as many single-family homes as I could. Keep them as rentals and wait for prices to go up." And I'm going to do a little clip right here when he talked about that. But I remember that.
If you are a young individual investor at home and you have your choice between buying your first home or investing in stocks, where would you tell someone is the better bet?
Well, if I thought I was going to live... If I knew where I was going to want to live the next five or 10 years, I would buy a home and I'd finance it with a 30 year mortgage. And it's a terrific deal. And if I, literally if I was an investor that was a handy type, which I'm not, and I could buy a couple of them at distressed prices and find renters, I think that's, and again, take a 30 year mortgage, it's a leveraged way of owning a very cheap asset now.
I remember that day because I watched it, it was on CNBC. And that was the bottom of the housing market. And at that point, prices started to go up and they started to go up slowly. And over the last couple of years, we’ve had this blow-off top, in my opinion, that signifies a top where it’s what is called FOMO, fear of missing out.
And it’s more based on greed where everybody wants to get into the market because they think the market’s going to continue to go up, prices are going crazy. And that’s what we’ve had over the last couple of years. We’ve had FOMO, fear of missing out. And then lately, there’s a lot of fear in the market and what I call FUD, fear, uncertainty, and doubt, which is now flooding the market.
And fear is a much greater emotion than greed. So when the market’s going up, it typically goes up a lot slower. But when fear kicks in, market’s correct. That correction can happen a whole lot faster. So in this marketplace people are fearful and they’re starting to ask the question, is this a good time to buy?
Is It A Good Time For You To Buy A Home?
It really comes down to you and a handful of things in terms of buying a home in this current market. So let’s dive in. Is it a good time to buy a home? So my question that I would ask you is, is it a good time for you to buy a home?
If you’re experiencing some fear, it probably means a couple of different things, in my opinion. Number one, a lot of people when they buy a home, save up money and put the majority of their savings into the home, and then they’ve got no money left over to weather a storm when and if this market does correct.
So if that’s you, it’s going to take up a lot of your money that you’ve saved up and it’s causing some fear and anxiety, I would say you might want to wait. The other thing that could cause some fear and anxiety is interest rates have gone up along with home values have gone up, which from an affordability standpoint, homes are now at the top end of an affordability index.
If the mortgage payment is something that’s going to strap you on a monthly basis where you don’t have a whole lot of money left over, at the end of the day, that’s not fun because you’re not living life. So if that’s you, I would say now might not be a good time to buy a home. The other thing that could be causing some fear and anxiety is just the marketplace that we’re in, our economy.
If you’re uncertain about maybe a job situation or your income that’s creating some fear to have yourself asking that question, is now a good time to buy a home, I would say it’s not. You might want to wait.
So the other big thing that’s causing a lot of fear and anxiety is just no confidence in the leadership of this administration in terms of a lot of things that are happening, inflation, mortgage rates going up, the decline in the stock market, which again goes back to having money in reserves to weather a storm.
If any of these things are causing you to ask this question, the better question to ask might be, If I buy a home right now in this market, do I have enough money in reserves to weather a storm when and if something were to happen? So in my opinion, that’s the better question to ask. Do you have enough money at least six to 12 months in reserves to weather a storm if you were to buy a home and something were to happen?
Sleep Factor
In my opinion, it’s called sleep factor for me. If it’s going to keep you up at night, don’t do it. But if you’ve got money in reserves to weather a storm, it helps what I call the sleep factor and eliminates a lot of fear. So again, I would turn that question around and ask yourself some different questions in terms of why are you feeling that way and whether or not you can weather a storm.
Dave Ramsey - Is The Housing Market Going To Crash!
I’m a big Dave Ramsey fan and I follow a lot of his principles. And he recently did a video on YouTube that was really, really good. And it was titled, Is the Housing Market Going to Crash?
Dave makes a really compelling argument. And although I agree with a lot of what he’s saying, there are parts of it that I just disagree with because he’s leaving some things out of the equation.
And that is income and employment and jobs. And if things do pull back and companies start to lay off people or even go out of business, that affects household income, which in turn can have a major impact on whether or not people can maintain paying their mortgages. So again, for me, it’s too soon to tell. He makes a very compelling argument and I would encourage you to watch the full clip.
Housing Market Home Invetory History
We knew exactly what was going on. And US home inventory is about three million, right now is about three million less than it was at the height of the market during the last pull down. So July 2007, was the high of the home inventory at a little over four million homes listed in the MLS in all of the US.
Currently, there are about 1.3 million active listings in the MLS. So it goes back to supply and demand. There’s still inventory shortage, which if Dave’s right, home prices will not crash.
And a little bit about the Tucson MLS. 14 years ago when we hit the low, which was April 2007, there were 10,387 active listings in the MLS. And moving forward in terms of when we hit the low in Tucson was March 2021, there were 928 active listings. And we’ve come off that. And I would encourage you to watch my monthly, I do a live inventory update in terms of what’s going on here in the Tucson market.
So inventory levels have come up. We’re still low relative to a normal supply and demand. So that’s a little bit of history. And again, Dave will be right, provided that inventory levels don’t drastically go up. So it’s something that I watch. And to me, it’s the leading indicator. And if you’re really interested in following the market and wanting to know if it’s a good time to buy or not, watching inventory levels is key in my opinion.
Back To The Questions: Is Now A Good Time To Buy a House?
Back to the question, is now a good time to buy a house? Only you can answer that question. And again, I wish I had a crystal ball and I could predict the market. I don’t. But you need to go back and ask yourself a few questions. Number one, do I have enough money to weather a storm when and if this market pulls back, six to 12 months to weather a storm? Is your job and income secure?
If you’re answering no, to a lot of these questions, I would say right now is not a good time to buy a home. But if you do have money to weather a storm, if you’re secure with your income, now, in my opinion, still is a good time to buy a home.
A lot of things to think about, but again, you got to ask yourself that question. And if you’re feeling fearful, there’s probably a reason. And my answer would be probably now is not a good time to buy a home. But for a lot of people, now is a good time to buy a home.
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