What we say about January 2023?-It is a good time to buy

New year, new housing market. After battling three long years of an extremely competitive market, home buyers, is now finally a good time to dip your toe into purchasing a home?

Quite a few things have changed in 2023. Mortgage interest rate has risen significantly. If you haven't purchased any homes in the last ten years, you possibly will be shocked to see such a high interest rate, hovering around 6%. Many homeowners are not ready to give up their low mortgage rate and purchase a replacement home with a much higher rate. Hence, there are still a shortage of homes for sale on the market. Such headwind against home buyers will not go away soon.

While we lament the high mortgage rate and high home price, this overwhelming emotion veers us from taking a serious look at the benefits of home ownership. Home ownership is still the most proven way to create and accumulate wealth. According to the data collected by Federal Reserve’s Survey of Consumer Finances, homeowners' net worth is around 40 times more than the renters'. A study from Journal of Economics Perspectives also found home ownership as an investment outperforms other investment channels. The accumulated increase of your home value, which leads to increase of equity, is a major contribution to this huge difference. The tax deduction benefits of your housing cost is another factor that help you to keep more of your income every year. In this case, having a mortgage payment and paying property tax is not necessarily a bad thing. So, from a long run, owning is always better than renting.

What about buying home at this moment? The market report of the most recent quarter in Los Angeles area as well as in California already showed year-over-year price decline. This is another clear sign that the market has cooled. This is a good news for people who are shopping for home out there. The demand is damped by the increased interest rate. You will have way less competition when you decide to pull the trigger to put down an offer. Even though you might not feel the price has nudged downwards for the types of neighborhoods or homes you are looking at, the trends show that the Seller is definitely more willing to consider concessions. This means it is more likely to successfully negotiate the purchase price and/or the purchase terms with the help of your Realtor, who knows the market well and has years of experience negotiating for real estate transactions. Seller is always more sensitive to price or price reduction, which can lead to impasse if the only focus is on negotiating for lower price. Your Realtor can guide you through other areas in the transaction that can still potentially save you overall housing cost and bring more benefits to your purchase. Realtors also have close connections with lending parties. They can work together to show your alternative mortgage program, such as Adjusted Rate Mortgage or buying down mortgage rate, to lower your monthly housing payment.

So if you have tried or thought about buying homes in the past few years but haven't reached your goal, this is absolute a good time to strike again. If you have any questions about how I can help you achieve your real estate goal, contact me and let's connect.