Who Benefits in These Uncertain Times? Market Update July '22
The housing market in the most recent years has been a roller coaster to say the least. It's crazy to think just a few months ago you were able to lock in a 30 year 3% fixed rate mortgage, and today rates are pushing upwards of 7%! To put this into perspective, if you had a downpayment of $100,000 at a 3% rate purchasing a $1M home, your payment would come out roughly to $3800 per month. Now, playing out that same scenario with a 7% interest rate, would increase your monthly payment to roughly $6000! You would be paying $2200 more for the same house you could have bought a few months ago. According to an article recently published on Bloomberg, "Purchases of new single-family homes decreased 16.6% to an annualized 591,000 pace, the weakest since April 2020." (Refer to photo) We are witnessing this in real time. All of our investors who finance their investment properties are currently sitting on the sidelines waiting for a better macroeconomic environment until they re-enter the market. I know in trying times it always helps to, "look on the bright side," but is that even possible in this market? Well I'm glad you asked! During the peak of the market, you would find yourself competing against multiple financially well off individuals to win on a home you really like. But, as we discussed earlier, those individuals are out of the market right now. So if you have aspirations of owning a home in the Bay Area and you aren't as strongly finically equipped, now may be a good time to purchase a starter home to get you rooted. You may suffer in the short-term with a high interest rate, but you can always refinance when the interest rates drop. This way, you're able to actually take the time, view a home, make a reasonable offer, and even ask the sellers to make repairs for you! These conditions were UNHEARD of a few months ago. I know this method may seem unfair or undesirable, but it is the reality of the situation. Property around the San Francisco Bay Area has always been highly desirable, and we don't see that changing anytime in the foreseeable future. So, if you want to see if those dreams of home ownership in the SF Bay Area are still attainable, please reach out. Let us help make those dreams a reality.
