Let’s answer some of your burning questions about home buying as we approach Q4 of 2023.
Is now a good time to buy a house? (Especially in the Flathead Valley)
Let’s dive right into the hottest question we get no matter what current housing market conditions or current mortgage rates look like. “Is now a good time to buy a house,” and particularly in the Flathead Valley? My answer to this burning question is usually, “if you can afford to do it, you can’t afford NOT to do it.” I’m not saying to over extend yourself on a home. I’m just saying that if you can afford to do it now, you should probably do it now. My sincere opinion comes back to the old adage of “time in market trumps timing the market.”
Why would now be a good time to buy a house?
If you don’t currently own a home, are comfortable with your job security, and are also comfortable living in the home (or paying the mortgage) for the next five years, then it is almost always a good time to buy a house.
There are market factors at play right now that also suggest it’s still a good time to buy. Let’s dive into some of those market factors that should weigh into your decision.
1. Current rent conditions vs. mortgage payments
Homeownership comes with many positive benefits. None bigger than earning equity over time (the “time in market” equation). When considering buying a home vs. continuing to rent, a potential home-buyer should compare average or median monthly rents to their potential monthly mortgage payments. You can check out the current median rents in Whitefish & surrounding areas here. Remember to keep in mind that mortgage payments are earning you equity over time and rental payments are not. Rents in the Valley are currently high, and sit right under the monthly mortgage payment amounts we’ll reference below.
2. We’ve tipped slightly into a buyer’s market (at least according to Realtor.com)
As of the time of writing this August 25th 2023, Realtor.com is showing a slight buyers market in the Kalispell, MT area. You can view the Realtor.com Kalispell housing market data here. The data shows we’ve been in a buyer’s market since July of 2023. Supply of homes right now is greater than the demand for homes, and the average sale price is actually 2.11% lower than the listing price. The average time on market was 53 days in July. This suggests there’s some wiggle room for buyers in negotiations. This is a far cry from the heightened COVID buying frenzy, when we tended to see homes going for 20-30% over list price.
Should you wait for mortgage rates to drop to buy a home?
A big burning question in 2023 has been “should I wait for mortgage rates to drop to buy a home?” Even though Fannie & Freddie predict interest rates could even grind down to 5.9% by Q4 2024, the answer to waiting is still no… Let me explain that answer below.
Even if rates drop in 2024, it doesn’t mean you’ll save tons of money
According to Rocket Homes data, the median sale price rose 1.1% YOY from July 2022 to July 2023. Hopefully you weren’t one of the people in July of 2022 waiting for rates to drop while property values rose. If you were qualified for your dream home at the top of your budget then, that home is most likely out of reach for you now.
Sure, rates are forecasted to drop in 2024 but this doesn’t mean you’ll save big money by waiting. When rates drop drastically, housing prices tend to rise sharply (check out pre-pandemic mortgage rates & proceeding rate drops vs. home price increases). If rates were to drop from ranges above 7% to ranges in 5% interest, demand for homes should increase. Likely leading to price hikes.
Is it best to buy now and refinance if rates drop?
If you can afford the house and payments now, then the answer is probably yes. Nobody has a crystal ball that can tell what the future holds. But by buying now (and possibly negotiating the sales price) in a neutral/buyers market, you’d be saving on potential property value hikes into the future. You would stop throwing away money on rent and you’d start earning equity now. AND you would be able to save money on future interest via refinancing your home loan if rates do drop. The below chart shows the math on just how this scenario would play out:
Are you still hesitant about the numbers?
Home buying is always a big decision and not one you should face on your own. It’s always best to sit down with a mortgage broker and crunch the numbers. First see what you qualify for and how mortgage payments would fit into your budget. Talking with a realtor can also help to determine market conditions and gain some perspective on past situations and future market possibilities.
If you’d like to discuss with a mortgage broker, please reach out to us at: (406) 897-2165. A qualified loan officer is here to assist you with any questions you might have about the home buying process.