There’s no doubt about it: Whether you’re a seasoned investor or a first-time home buyer, purchasing a new residence is an exciting experience. It may be the vacation home you’ve been dreaming of as you dedicated a large portion of your life to your profession, or it may be the Seattle home where you envision raising a happy, bustling family. Whatever the case may be, it’s a cause for celebration.
Recent and radical shifts in the economy, however, may have dampened your dreams. And yet, what many tend to forget is that the current and upcoming changes in the real estate market have the potential to benefit buyers.
Read on for expert agent Kevin Lam’s explanation of why the deceleration in the market may work beautifully in your favor.
Real estate is always a superb investment
First things first:
The world is constantly changing, but one thing has historically been and remains the same: Real estate is one of the best investments you can make.
Why, you may ask? Let’s have a look at a handful of the reasons:
- It builds equity
- Real estate is substantially less volatile than the stock market
- Homes appreciate in value and recover after dips in the market
- The longer you hold onto your property, the higher your appreciation will grow
- It gives your portfolio greater diversification
- It allows you to draw in a passive income on rental properties
- It arrives with several tax benefits
Why buying is always better than renting
Photo courtesy of Kevin Lam Homes
It’s difficult to say that renting means you’re throwing your money away; after all, we all need somewhere to live. And yet, once you leave your rental property, you will have nothing to show for it. A home, meanwhile, is a tangible asset. Moreover, owning a home affords you a level of security. From your landlord’s decision to sell (and the need for you to move) to outrageous spikes in rental prices, renting means you’re always at the whim of the people or the company with whom you have a lease. This can be unnerving, and uncertainty of this magnitude may even take a toll on your physical and mental health. Rental prices, which have already shot up considerably, are also expected to rise as we move into 2023.
Those new to real estate may fear that they will simply be unable to pull off a monthly mortgage. Many may not realize, though, that the difference in monthly payments isn’t as significant as they might think. Certainly, this depends on where you’ve chosen to purchase a property, but you may be surprised. According to Seattle Agent Magazine, the median sold price for Seattle homes is $762,000. With a 30-year-fixed mortgage loan and a 20% down payment, the monthly payment would be approximately $3,700. The average monthly cost of rent for a two-bedroom apartment in Seattle, however, is $3,322. Again, this varies state by state, city by city, and by the apartment size; the point is, you may be wonderfully surprised by the trivial difference.
Lastly, owning a home is, well…priceless. Whether it’s your vacation home or your primary residence, you’re bound to create indelible and remarkable memories within it.
Interest rates are climbing, but home prices are falling
True, mortgage loan rates have skyrocketed in the past year, rising from 3.09% to nearly 7%. This has daunted prospective buyers and resulted in curbed demand, which almost feels astonishing after a historic two-year run on real estate and demand that exceeded available inventory.
The steep climb in interest rates, however, may work in a buyer’s favor. Home prices have already dropped across the nation and are predicted to decline by a whopping 20% in 183 cities across the States. Translation? You may be able to get in on a home now or in the near future while prices are lower and sellers are eager to find buyers. If the interest rates seem absurdly or even prohibitively high to you in the long run, keep in mind that refinancing is always an option once interest rates drop.
You may have more housing choices and greater leverage during negotiations
Photo courtesy of Kevin Lam Homes
For the past two years, inventory has been exceptionally tight, so much so that bidding wars, waived contingencies, and homes selling above their listing price became the norm. This was a boon for sellers and for those who swooped up their dream homes. It deterred others, however, or pushed them out of the equation entirely.
As home prices stabilize and demand decreases, inventory will increase, thereby providing you with more options. What’s more, in the absence of multiple bids and incredible competitiveness, you may be at liberty to ask for the contingencies you would like, request special terms, and maybe even underbid. Why? It’s simple: sellers will be more motivated to find a buyer.
Time will be on your side
Real estate moved at a stunning, frantic rate in the last two years. The increase in demand, coupled with low inventory, translated to buyers acting fast. As the housing market cools down, however, buyers can move at a more leisurely pace to ensure the home they bid on meets their needs and suits their ideals.
Foreclosures may increase
Experts indicate that foreclosures could begin to rise to pre-pandemic levels. For prospective buyers, there are several drawbacks to purchasing a foreclosed property. Chief among them? You’ll be purchasing the home as is and may have to put up a great deal of cash during an auction. Nonetheless, foreclosures can also be a smart move for those who are interested in investing in real estate at a lower price. While we won’t witness the devastating number of foreclosures we saw in 2008–and thank goodness for that–this shift in the housing market may open up even more opportunities for enthusiastic investors.
Intrigued by the possibility of taking advantage of the slowing housing market? What you need most is a trusted real estate agent to give you sound, candid advice. Kevin Lam is just this type of agent. Specializing in Bothell, Kirkland, and Seattle real estate, Kevin would be thrilled to serve as your committed guide through your real estate endeavors. Book a consultation with him today to discover more about why buying is always better than renting and learn about the opportunities that await you.
