Buying a home is a big decision. There's a lot of stress finding the right home, the right neighborhood, and having the right finances. You have to look at what you can afford and the future of the housing market. Will housing prices continue to climb? Will interest rates go down in the future?
This episode will shine light on some of these issues. Sam is joined by Senior Wealth Advisor, Adam Day to talk about whether you should buy a home in 2023 or wait it out. We talk about historical interest rates to help shed light on current interest rates. We talk about home values and how the lifestage that you are in will affect your choices.
[04:23] Average interest rates in the 1980s were close to 18%. In the early 2000s, interest rates were near 7 or 8%. In 2020, interest rates for two and a half for 3%. Now they are around 7 or 8% again.
[05:19] 3.7% is the average rate of all outstanding mortgages currently.
[06:11] First time home buyers will think these current rates are really high if they didn't experience them in the '80s.
[06:23] For retirees, it's often more about downsizing and using cash.
[06:49] In 2020, median home prices were around $330,000. The median home price skyrocketed to $480,000. Recent data is now $416,000.
[09:06] Adam has always moved from a life stage perspective, not because of the market.
[10:08] Similar to the stock market, the real estate market is very hard to time.
[11:52] If it's the right time for your family to change homes, and you have a financial plan to make it happen then buying could be a good decision for you.
[12:46] If you're trying to decide whether you should rent or buy a house, it usually comes down to your money story.
[14:23] We talk about the home capital gain exclusion for your primary residence. There are rules, but it's up to $250,000 for single people and $500,000 for married people.
[15:12] Can you afford the payment is your first consideration. Is a higher payment worth it? Price and rate matter, but what's important to your family is an important matter.
[17:24] Your home shouldn't be an investment, it should be a use asset. Even though, historically it has been a great investment.
[19:53] There is some flexibility when you buy and sell. If you don't have to make a move, it's okay to sit around and see what's going to happen. There are also creative ways to purchase a house.
[21:55] A home purchase doesn't have to be forever, and you are not stuck in the decision.
[22:36] Practical tips include understanding that things can change in a few years. You can also get creative with your mortgage or your financial advisor might have some good strategies.
[23:11] Understand your own money story and why you want to move.
[23:39] It's also possible to assume loans from the original seller. This is the strategy to keep interest rates down. You just have to have enough cash to cover the difference between the mortgage and the home value.
[24:23] Things to avoid include withdrawing from an IRA. Try to put enough down to avoid PMI. Look at the details of the loan and avoid unnecessary fees and take your time making the correct decision.
[25:31] Do you need a home this year and does it make sense from a spending perspective?
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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