Is it better to buy or wait in the current real estate market

The homebuyer dilemma involves several factors to consider; House prices could continue to rise

JACKSONVILLE, Florida – It’s a bubble, and all bubbles will burst at some point.

But for budding homebuyers, the questions about the current real estate market start with how fast and how strong?

We have our eyes on one such hopeful homeowner, Jesse Rivers, who lives in Jacksonville but rented the house he shares with his teenage son.

Rivers recently decided to suspend its search due to the pressure it is facing like so many bidders.

“I just know that right now it feels like I’m forcing it,” Rivers said. “And every time I’ve felt this way, it always didn’t feel right.”

In a cash-flooded market that routinely forces shoppers to forego assessments and / or inspections or to push them off the table, demand continues to far outweigh supply.

“The problem for home builders is that they work as hard as they can to keep up with this insatiable demand,” Amanda Pendleton, home trends expert for Zillow, recently told First Coast News. “And that is really a challenge.”

The challenge is compounded by slowdowns in building supplies caused by everything from the COVID-19 pandemic to weather events.

“Wood prices have increased by 360% this year. We also have a labor shortage, ”affirmed Tanis Anderson, senior loan officer for the Jacksonville area.

Other pandemic-related factors have contributed to the current situation.

Institutional investors, who tend to be more concerned with commercial real estate, have turned their eyes to residential real estate as the COVID crisis has shifted much of the workforce away from the office and into domestic work environments.

Pendleton said the pandemic had accelerated two already established trends and hit northeast Florida more than some other parts of the country.

“People were looking for relative affordability and also looking for places that had warmer weather,” Pendleton said.

And another factor, she said, is a brewing intergenerational competition as retirees try to downsize to some of the homes that millennials target as starter homes.

“And so we have millennials and boomers, both competing for this kind of bottom house […] something that is a little more affordable, “explained Pendelton.” And this is where we really see the biggest price increase. ”

Back to the first question: how quickly will the bubble burst? Buyer, prepare yourself.

“We expect these trends to continue for many years to come,” said Pendleton. “Zillow predicts property values ​​will rise 12% over the next year.”

That’s a statewide prediction, and she added, “Jacksonville is following what we see nationwide.”

However, Pendleton said that didn’t mean that house prices couldn’t go down.

“We expect inventories to increase over the course of the year,” admitted Pendleton. “It could dampen price growth a little, but at least there will be more options for buyers.”

Even if we somehow knew when home prices would drop significantly, it’s not that simple. The historically low interest rates, which are another source of the buying frenzy, could be significantly higher by then.

Pendleton also had a point of view on this variable.

“We expect these rates to rise over the course of the year as we see more of an economic recovery,” she said.

In other words, even if house prices correct in favor of buyers, the wait could become more expensive.

“If you enter the market now, you will have more purchasing power than waiting until, say, autumn or even early next year,” predicted Pendleton.

Financial planner Bob Horne of the NuVenture Financial Group in Jacksonville put it differently.

“It’s really a risk whether you’re buying something really high prices with a low interest rate now, or waiting a year or two and maybe buying something that might have slightly better value or price, but potentially higher interest rates,” Horne said.

What difference can that make?

For example, suppose a buyer borrows $ 200,000 on a 3% 30 year mortgage, then if the interest rate were instead 5%, their monthly payment would increase by about $ 120.

At that 5% interest rate on the same 30 year note, a buyer buying a $ 330,000 home would have to increase their down payment from $ 130,000 to about $ 170,000, or the price to $ 290,000 – Lower $ to eliminate the $ 120 monthly mortgage payment difference.

Anderson pondered this compromise.

“Is the price important to you or is the monthly payment important to you? And most people will always say it’s the monthly payment. ”

Which seems to prefer the “buy sooner rather than later” approach when you can find a seller who prefers your offer to everyone else.

The reality is that no one can say with certainty when exactly this optimal moment is for an individual. Despite Pendleton’s sobering outlook for people who choose to wait and see, she stressed that the most important factors could be internal, not external.

Factors that no one else can decide for you.

“The best time to buy,” she said, “is when it is the best time for you and your family.”