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First remember, it's an investment as well as a shelter. Any investment vehicle has its highs and lows (dips), real estate included. However, real estate as an investment vehicle has always trended upward as time goes on. So, if you go into it with a long-term mindset, you'll survive the dips (don't let them concern you) and end on the upside.
How to survive the dips?
The purchase needs to fit your budget. In a market where you may be paying more for the property than you’d like, there’s a big chance you’re going in upside down. This means your investment may not build any equity (the home being worth more than you paid for it) for a couple of years or more. In a normal real estate market, we see 3% to 5% equity growth year over year (YOY). National home equity was up 31% in the third quarter of 2021 YOY according to CoreLogic Homeowner Equity Insights. That upward trend was only going to last so long.
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As buyers tap out of the market due to low inventory, too much competition and out of reach pricing, nationally and locally prices are now trending flat. Here in Sacramento the median sales price has fluctuated up and down each month for the past six months. CoreLogic HPI Forecast indicates home prices will remain flat on a month-over-month basis from December 2021 to January 2022 and increase on a year-over-year basis by 3.5% from December 2021 to December 2022.
So, if you find a home that you love or must buy and can get into make sure you have additional cash reserves on standby in the event of an economic downturn of any sort (job loss, financial emergency, etc.), personal or government imposed. Your property purchase may not be able to supply you with any cash (equity) for a while until the market turns in your favor. But when it does you may reap exponential financial rewards.
What are your thoughts on buying now?
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