Let’s be honest, the world feels a little crazy right now. With rising gas prices and food prices, a war with Russia and Ukraine, a wild real estate market and all the general uncertainty, it can be easy to feel a little anxiety which leads to inaction. But here is why, if you have been thinking of buying a home (so if you’re renting and want to buy OR you own a home and need a bigger one), you need to be pulling the trigger now.

First and foremost, real estate is a hedge against inflation. A golden rule in finances is to never finance a depreciating asset. A depreciating asset is like a car. When you buy a car for $40,000 and finance that car, you are both paying interest on the loan you just took out for the car AND your vehicle is losing value. Cars do not appreciate in value. Historically they drop in value relatively quickly. So you are “paying” interest on the loan AND “paying” the depreciating value because that value is dropping.

Real estate, however, is an appreciating asset, which means that, over time, it will continue to grow in value. So even though most of us finance the purchase of a home, the value of that home is going up. Yes, I understand there are periods in history where home values dropped, but you have to look at the trends and historical trajectory of home values. I know someone who bought a home in 1990 for around $120,000 that today is worth over $500,000. That’s an appreciating asset. Now did that value go down by $50,000 during the real estate market bubble, absolutely it did, but today does that matter? Absolutely not. The value rebounded and appreciated into a very healthy and valuable asset. So as inflation rises, we want to have as many appreciating assets as we can.

Second, I’ve had the conversation a lot with people who say they want to “wait for the market to calm down and prices not to be so high”. Here’s the truth – a year from now, it is possible that you would have a better, less crazy experience buying a home. But here are the other more important truths.

(1) We need to stop saying people are overpaying for there home. At some point, when everyone is paying the same amount we’ve just reached a new normal.

(2) Waiting a year very likely means a much higher interest rate on your purchase. Every 1 percent increase on the interest rate DROPS your purchasing power by over 10%. SO, if you could afford a $500,000 house with a 4% interest rate, once the interest rate hits 5% you can only afford around a $440,000 house. Huge difference.

(3) It is highly unlikely that prices will come down, but even if they do, they would have to come down $60,000 in our scenario to offset the rising interest rate and it is extremely unlikely for that to happen.

(4) Everyone who decided to wait in 2021 because the market was crazy is kicking themselves now. Homes appreciated a ton in value and interest rates when up so now it’s just more expensive to buy. Don’t make the same mistake by continuing to wait thinking you can time the market because that just doesn’t work.

The market is still going up; buy while prices are still going up. Interest rates are still going up; buy while they are still historically low. The time to get in the market is now. If you’re in Hampton Roads, Virginia, and need help from an experienced real estate team, reach out to us. We’d love to help you make a game plan to protect yourself with the greatest asset most of us will ever own – our own home.

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