Interest rates are above 5% inflation. Is it time to buy? Is it time to sell? Not sure know what to do. Well, let’s dig into it.
Maybe you're a seller that's been on the fence about selling, but all this buzz about a slowdown has you thinking. Should I wait? Maybe I should rent? Maybe I should see if I can get a little bit more money?
Or maybe you're a buyer that's been swinging and missing and losing out on bidding wars. The talk of a slowdown has you thinking, maybe it is a good idea to wait a little bit longer to see if prices drop.
With all this talk about a slowdown. Here's my two sets.
Let's say you're driving on the freeway and nobody else is around; you're flying at 90 miles an hour, but then suddenly you see a highway patrol, so you're like skirt, and you slow down to about 65 miles an hour. Suddenly, it feels like you're crawling on the freeway, but you're not crawling. You haven't come to a stop. You just slowed down a little bit. You're still cruising at 65 miles an hour.
What I mean with this analogy is that appreciation is still happening. Just because we have an interest rate that's now at 5% or maybe a little bit higher, that doesn't mean that we're seeing a housing collapse. It doesn't mean that prices are extremely dropping. It means that buyer's power has diminished just a little bit, but we're still seeing appreciation.
If you look at a chart to see what's happened with interest rates over time, a normal market interest rate is around 8%. If we're still at 5% on a major overall trajectory, we're still at a historically low interest rate. Money is still very cheap to borrow.
Over time, we've seen normal appreciation be three to 6%, so we have an entire generation of people who are of home buying age, who are used to this unprecedented, explosive growth, seeing year over year explosive appreciation. That's not a normal market.
Sure, if we all had a crystal ball, we would all liked to have bought 10 years ago and make a ton of money. In a normal market, it's normal to see three to 6% appreciation. And with these adjustments and interest rates, that's what we're seeing right now. We're going to see prices are not going to collapse, they're going to adjust. We're going to see a little bit of a plateau, and this is, again, just one person's humble opinion. But I do think that we are still going to see steady appreciation. So no, this is not going to be a crash and burn where we're going to see prices, just literally go down.
We're going to see prices cap off just a little bit and then go smooth sailing. Because listen, when we've seen some of these houses go $500,000 over list and the same type of house comes on the market the next week, do you really think that house again is going to go $500,000 to a million dollars over list? No, because we're finally seeing the market catch up.
That's just my humble opinion. Whether you're thinking of selling and you've been on the fence, it's still a good time to sell. What we know right now is that there are a lot of people waiting in line to buy your house, and there's not enough housing to go around for all the people that want it.
If you're a buyer, we've talked about this before, money is cheap to borrow. You are going to kick yourself later when interest rates go up to 8%, and now you really can't afford to buy anymore because money's going to be more expensive to borrow. So, if you're thinking about buying, whether it's an investment property or a place to live in, do it now. If you have the means, that's just my 2 cents.
If you have any questions, or you want to start a dialogue, let’s talk.
Don’t forget to catch up on my weekly show, Taya’s 2 Cents, where share my two cents on different real estate topics from buying and selling real estate, owning a home and more.