"I'm going to wait and see what happens with the real estate market (election, gas prices, the war, interest rates) before I decide to purchase property."
I can't tell you how many times I have heard this phrase in the last six months. Yet, I can feel the interest and pent up desire from potential buyers who tell me this. So many people are looking, checking out Silver City and trying to make a decision to buy property here but are holding back because of the questionable times in our economy right now.
People often come to Silver City and think that they can "get a good deal" because the real estate market is slow. Well, first, let me say that it is not slow in Silver City, New Mexico like it is in the rest of the country. Yes, there are absolutely more homes on the market now than there were two years ago. And yes, home prices have gone down a little (itty-bitty) bit, and yes, houses are sitting on the market longer. But that is relative compared to what the market was like two years ago when it was "hot". There were fewer choices, there were hardly any homes worthy of purchasing under $200,000, and the homes that were desirable would have multiple offers on them. That was not a fun market for buyers!
Having more options creates a much better market for buyers. Even so, many are waiting to see if prices will go down some more. Worried that if they purchase now, property values may go down after they've purchased. And that could happen...could. Although I can tell you that I purchased a home a year ago, right at the end of our "hot" market, and my property value has already gone up (we're remodeling). This is true for many of my customers as well--even in this market.
Instead of looking solely at price, consider a couple of other equally (if not more) important issues when it comes to buying a home. While interest rates are still fairly low, they're expected to go up. As I write this, I believe that interest rates are around 6.75% for a primary residence. And many economists are predicting that the interest rates will rise rather than fall. Consider what you pay for a $200,000 home with a 6.75% interest rate versus an 8% interest rate or a 10% interest rate (click here for Mortgage Calculator). When my broker started her career in real estate, interest rates were as high as 19%! Just about the only affordable way to purchase a home was to find a seller who was willing to finance it for you at a lesser rate.
Another big consideration is that the guidelines lenders follow have continued to tighten since the mortgage "crunch" started last summer. Many factors are used in determining if a bank will loan money, they include the buyer's income, credit scores, length of employment, loan amount borrowed, etc. Currently, in some lending situations, the government sets these guidelines and they have become less rigid in an attempt to boost the economy. In fact, one of the best options around right now is the FHA home loan which is a government insured loan. (No, it's not just for first time home buyers and it's not government assistance for low income buyers in any way.) With the FHA loan, rates are competitive, as little as 3% down payment, the upfront mortgage insurance can be financed, the loan is assumable, and the limit is up to $270,050 in southern New Mexico. This is a great option for anyone buying a primary residence under this dollar amount.
Note to sellers: It's also a great time to sell. There's already talk in the economic world of the capital gains tax (tax that's charged on the profit of a real estate sale) as much as doubling in the next few years.
So, even though buying a home may seem risky right now with so many scary factors in the economy, be sure you weigh out your decision with the different factors. I often tell people, the higher the risk, the higher the rate of return. Ten years ago you would have gotten a smashing deal on property here. But ten years ago nobody knew that Silver City would turn into the cool artsy historical town it is today. That was the risk and it has tremendously paid off for those buyers. Is there still room for property values to go up in Silver City? Well, many of us that are in love with Silver City sure think so and we've certainly seen it happen in enough other cool small towns.
So my thoughts to all those with the "wait and see" mindset: Be careful that you don't turn into one of those people who wishes they would have purchased property when there was a lot to offer, the rates were low, and the loans were easier to get. If you wait till after the election or early next year to make a decision, you're liable to find yourself competing for the property you want because everyone that's "waiting to see" what happens is going to be ready the same time you are-when they feel better about the economy. Now is a great time to buy, and with some foresight you can stake your claim and you'll be one of those people who feels good about having taken action in the middle of uncertainty.