Investors Don't Want You to Buy Now
“I’m going to wait for the market to crash, and then I’m going to hop in.”
“Prices are going to come down; I’ll buy then.”
Investors want you to think this way. It leaves them more unfettered to gobble up homes at prices you might otherwise be able to afford.
“But the interest rates…”
What about them? The interest rates aren’t the issue, the inflated home prices are. That doesn’t mean there aren’t affordable homes still out there. A prudent buyer, ready and willing to go, is going to make off better in the long run than the self-touted market expert. Indubitably, they’ll even make off better in the short term. While rents may not have risen for you yet, they will. But even if they don’t, you’re still paying 100% interest on your home.
Because you don’t own it. In fact, you’re paying the mortgage of the investor who bought the property you yourself could have purchased. Here’s the most painful part: they don’t care if the property has a positive cash flow. As long as they break even, they’re doing okay. Better yet, they’re elated that someone else is paying their mortgage!
You’re putting your money into their savings account. That’s what a house is, after all: a savings account. And that’s where the major disconnect is for most would-be buyers.
A mortgage should not be viewed the same as rent. Rent payments don’t increase your net worth. They don’t build equity. And you certainly can’t reap the rewards from interest either. That’s exactly what a mortgage does. Stop thinking of it as a car payment. You’re not paying down debt to own something that eventually becomes worthless. And, unless you own a pristine 1962 Ferrari 250 GTO, then I hate to break it to you, but your Honda Civic isn’t worth more than when you bought it.
But your home is. That 2 bed/1.5 bath you took a chance on became your nest egg. You lived inside of your own personal savings account. And while you kept tossing money into it, it bore interest. It grew in value. Immensely. Perhaps it provided you enough equity as to where you could invest in that lovely bungalow, just minutes from downtown.
In reality, however, you waited for the market to crash. And even if it did, you weren’t able to cash in then either. You continued to sit on the sidelines, reassuring yourself that you’d get that dream home someday. All while your landlord increased your rent, year over year. And not because their mortgage payments were going up. No, it was due to ever-increasing rental demand.
It may sound rife with hyperbole, but it’s the cold, stark truth. Home prices are not slowing down. Not here, at least. The Triangle saw average June home prices at a whopping 21.6% year-over-year increase (see Market Update below). If you’re banking on a collapse and more affordable housing, then you’re going for broke.
And, although experts are predicting a slowdown in the pace of rising prices, they’re likely to continue to appreciate over the next 5 years. Even at an 8.5% growth rate, that’s well above your 401(k) rate of 5-8%. Inarguably, that’s immeasurably better than a return of 0%.
With the sudden shift—seemingly overnight—in the housing market, buyers have gained some ground. Unimaginable due diligence fees have shrunk to near pre-pandemic levels. Inspection waivers are disappearing. And sight unseen offers have gone AWOL. In fact, buyers have room to ask for concessions and receive them!
So, what are you waiting for? Your rent is going to rise, and when rentals become unaffordable in the place you’ve called home for decades, you’ll be shuffled to the outskirts. The places you wouldn’t dare go to look at homes to own will become the next place you start paying someone else’s mortgage. Because they were willing to take the risk.