Is Homeownership Worth it Today?

The following blog is a guest post by Joe Dykstra, a REALTOR? with RE/MAX of Grand Rapids.

The common question first time home buyers are facing today is, “Should I buy right now?” And other questions that might derive from this are such questions as: “When is this housing bubble finally going to pop and the market going to crash?” “Should I wait for interest rates to come down before I buy?” “Should I wait until I have more money for a down payment or more income before I take on a loan?”

Well, it certainly is a loaded topic to consider and a big decision to make for a person. And a lot of people wonder whether homeownership is even worth it, in a time where home prices are soaring and interest rates (on average) are the highest they have been in about 15 years. But I hope to dispel some common misconceptions and maybe give some guidance to any reader who might be wondering about such things.

If you pay attention to the real estate market, you probably know that the big news headlines are not completely trustworthy. They often make claims that are a bit outlandish in the attempt to catch your eye. They say that the market is poised for a crash, that it is a good time to wait, that the market is finally slowing down, etc. Some of these things may be true, depending on where you live in the country. Different areas have different markets and have had different market changes over the past year. Some cities certainly are experiencing a slowdown, mostly big cities in the west. San Francisco’s home prices, for example, are falling (falling, not crashing) more than almost any other city in the country. Many are moving to other, more affordable, “up-and-coming” areas. Grand Rapids, MI is one of those areas.

If you live in the West Michigan area (and if you are reading this, I suspect you do), you might be falling into the belief that our prices locally are extremely high right now. However, people moving from San Francisco would strongly disagree! The truth is, Grand Rapids (and its suburbs) has been a very affordable area to buy in for a long time. As a major metropolitan area, it has been far less expensive than the average “big city”. And that is why our local market has remained so strong. A lot of people are moving in and we have many people locally who are buying, and inventory still remains low. As long as demand stays high and supply is short, the market in West Michigan will hold steady.

So maybe that dispels one question for you, the market here is not crashing soon. Yes, I know prices are inflated and indeed we are due for a recession, but I certainly do not see it happening in the near future. It will likely be years before things start dropping enough to make it worth waiting right now. So, what is our market going to look like this year?

We experienced a slow period for a couple of months at the end of 2022 and the very beginning of this year. But now, we are back to a highly competitive market. Offer deadlines producing multiple offers are commonplace again, and buyers are going the whole nine yards to make their offers look nice. Appraisal gaps, waived inspections, fast closings, non-returnable deposits, etc. This was caused by a buyer activity spike in early April (see image below). Buyer activity is higher right now than it was last year at this time, and inventory is still far too short!?

?

This has been great for sellers, and most houses are again selling for over asking price. And thus, our market prices are poised to go up again this year. If you own a house in West Michigan, its value is still increasing (assuming you are taking care of it), and if you bought today, you would be gaining equity as soon as you take ownership. So there should not be worry or concern of your home losing its value right after you buy. Its equity will hold in this market.?

And yes, interest rates do seem high right now (although, someone in the 90’s would think a 6.5% interest rate was a steal!). But they are not going to crash down soon, to a point where it would make it worth waiting. And if in the future, they do, you can refinance your home for a lower rate then. But it is probably not worth waiting for that time, because there is an abundance of people waiting on the sidelines right now. And if/when rates drop and they jump into the market thinking that they hit the “perfect time to buy”, competition will make it even harder to buy than before.?

Let’s take a look at “Joe Buyer''. It was 2023 and interest rates and prices were soaring, and Joe thought, “There’s no way I’m going to buy right now.” And so, Joe rented for years and years and then finally bought when he secured the price and interest rate that were just right. Joe fooled himself into thinking that he had bought at the perfect time. Something I often say to clients is, “Rental payments are 100% interest.” The truth is, Joe could have been building equity all the time that he was waiting, instead of making payments that were going “down the drain”. Even if he did have a high interest rate, he would have been building more wealth because he would be putting money in his home, instead of in his landlord’s pocket.?

In summary, there are a host of things that might make a person scared to get in the real estate market, but waiting for the “perfect time” is not worth it and in my opinion, nearly impossible to do. A year and a half ago I had people telling me that they were going to wait, because house prices were going to come down in 2023. Now many of those people are needing to buy right now, in a market that is higher than last year, and just as competitive. So don’t wait to at least get the conversation started, it is better to be early than late. If you are holding off buying right now, you might be looking back at this time next year, wishing you had bought. Prices are high, yes indeed, but they are and will continue to go up!?

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Joe Dykstra, REALTOR, RE/MAX of Grand Rapids, Provisio Retirement Partners and LPL Financial are not affiliated.

?

Joe Dykstra

REALTOR?, RE/MAX of Grand Rapids

Office: (616) 261-3100 | Cell: (616)916-4858?

[email protected]?

5651 Byron Center Rd. SW, Ste. 200?