Housing Forecast 2021 For First Time Home Buyers
What Does The 2021 Housing Market Have In Store For People Trying To Afford Their First Home?I’m a realtor with exp Realty here in Southern California. Old-school readers know that in early 2019, after many years in the biz, I had enough with all of you wonderful deserving first-timers being treated like the crew on Mission: Impossible 7, even if Tom Cruise’s heart was in the right place. I changed my whole business to see if I could give my knowledge away for free here in the show and make sure that you folks out there were getting treated right. If you’re new to the show, my son, a YouTuber says, smash that subscribe button. Go ahead and hit subscribe. You’ll automatically keep getting more free information. If you have specific questions or quandaries, head to our trailer episodes here at the top of the bottom of your feed or look for the one that says trailer. That’s your guide to read this and help you find all the answers that you’re looking for. You got to be curious by nature. I know that because the show’s called How to Buy a Home and you clicked it. I’ve done all the work for you on this one and there’s a lot of info out there. Don’t be freaked out by the fact that this might be a longer episode. There’s a ton in order to try to figure out what the hell is going to happen in 2021. This one is for the ride to work and the ride home or it’s two workouts or two dog walks. You decide. I want you to hear both sides of what people are guessing things are going to be in 2021. I want you to get all the facts and find out what you’re looking for. I want you to get answers and information because comprehension of this stuff is powerful. My goal is to make you a home buying rockstar, empowered, confident and knowledgeable, ready to make your plan. It’s safe to say that 2020 was the worst year ever. A total dumpster fire, not cool, not dope, not sick, not fire and not pog for your gamers out there. 2020, we started with a global pandemic, then a lockdown, then we all binge watched the cringiest man ever at his private, exotic animal zoo while he and his ridiculous mullet planned to murder a woman.
The 2020 SurpriseThat psycho woman who was planning a murder, she murdered her first husband and fed him to a tiger. Follow all that debacle with the cancellation of sports, movies, theaters, bars, concerts, travel, anything fun or just going out in general. You throw in lots of civil unrest, a wacky election and one Florida man who paid $150 for a full-contact experience who got mauled by the leopard. Seriously people, what is the deal with the big cat obsession? We wrapped up the year with a wacky election, a new Congress and administration. A lot of us had our holidays over Zoom, we finished it with the weirdest New Year’s Eve ever. In the middle of all that, the most surprising thing to happen in 2020 was this COVID supercharged the US real estate markets rather than upending them. Lawrence Yun, a leading economist said, “The housing market has shown remarkable resiliency in 2020 and 2020 is certainly a year of surprise on many fronts.” Thank you, Captain Understatement. Do you think 2020 was a lot of surprises? At the beginning of the year, it looked as if the 2020 housing market was setting up to be one of the hottest in years, January and February and the beginning of March were nuts then COVID fun time. In housing, it sucked for a couple of months. Everyone was trying to figure out what the heck were we going to do. Initially, COVID-19 impacted demand substantially. It dropped big time but record-low mortgage rates saved the day and demand soared, turning the rest of the year into frenzy buyers shopping for homes in masks, gloves and booty buyers. That’s what we called them. Booty buyers got into bidding wars because there were low supply and low mortgage interest rates and high demand ruling the market. Everybody was trying to get the same Oreo cookie. Keep that in mind as we head into our 2021 discussion. On December 24th, Christmas Eve, Freddie Mac, that’s an entity on the secondary mortgage market. They’re under government conservatorship since September 8th, 2008. They maintain a secondary mortgage market for conventional loans by buying loans for mortgage companies that originate them. Know this. Freddie Mac, this is their jam. This is what they found out with the survey. With the right guru unicorn on your side, you can still buy your first home while prices and interest rates are low. Click To Tweet They reported that recently the 30-year fixed mortgage hit a 17th record low in over a year. Over that year, record lows kept happening, to the point that seventeen of them happened. The interest rate was 2.65%. In 2019, they were 3.74%. That’s for your mortgage interest rate, which determines how much your payments are going to be. Did you even get that? 2019’s highest rate was 3.75 and that is still stupidly insanely low. In 2020, the new mortgage rates crushed that all year long. More on that later. I’m going to do it now. Do you guys have any idea how low that rate is? Since 1971, the highest mortgage interest rate on record was October 30th, 1981 at 18.44%. January 2021 was the lowest mortgage interest rate in the history of them keeping track of that data. 2.65% lowest ever. Do you understand that? That’s it for now but I will explain how sick that is later. By the time we got through the 2020 poop show, nationally, home prices had increased 8% over 2019 with the fourth quarter of 2020 seeing a 20% increase in home sold compared to 2019. In a pandemic, 20% increase in home sold from the year before at the end of 2020 in a lockdown right after and during the whole election craziness. It’s nuts. According to the real estate company, CoreLogic, they say, “While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability were incentivized to buy, given the record low mortgage rates available. This increased buyer demand while for sale inventory was in short supply.” What do we get there? Nationally home prices increased 8% in 2020. It was so insane. Even the CEO of Home Depot said that he had crazy surprising growth in the middle of a lockdown. That’s 2020 in a nutshell. In order to move ahead and to predict how 2021 is going to go, we need to see how the year ended. We talked about that, let’s hear what economists are thinking. As we finished up 2020 and are starting 2021, where they think we’re going to go next so that you can be informed and talk to all your friends, your big old smarty pants. According to Realtor.com December 2020 housing report, the number of homes for sale at the end of the year reached an all-time low. Even though the sales numbers, the number of homes that sold was 20% up. The number of homes for sale was at an all-time low hitting below 700,000 homes nationwide for the first time dropping, 39.6%, that’s almost a 40% drop off from 2019. That’s 449,000 fewer homes for sale. December of 2019. Supply and demand. Get this. Realtor.com Chief Economist, Danielle Hale said, “December 2020 data points to possible relief on the horizon. The figures that have impacted us the most in areas with large COVID surges. We eventually expect to see improvements in the supply of homes for sale especially in the second half of the year. Until then, finding a home will continue to be a top challenge for buyers across all price ranges.” We have a supply problem but it’s not the first time this happened. There are ways around this. You can still get this down with the right guidance. Stay tough, stay gold, ponyboy. If you don’t know what that means then you haven’t seen The Outsiders. That means you should go stream it. Go watch The Outsiders. It’s got the guy from Cobra Kai, the guy from the Atkins commercials and West Wing. It’s got the dude from Dirty Dancing. It’s got the coach from Mighty Ducks. It’s got Tom Cruise. It’s got the bass player from the Red Hot Chili Peppers, Flea, and Nicolas Cage. How have you not seen that movie? Stay strong, stay gold, ponyboy. The Outsiders quote. I’m serious. Stay strong. I’ve seen markets like this before. I’ve been around awhile, obviously because I’m referencing a movie from 1983. In fast-moving markets like this, we used to bring contracts to the homes that we were showing our buyers.
Nobody’s Got A Crystal BallIf the buyers liked it, we’d go outside and we’d write up the contract right there on the trunk of the car. If you’d like, you can read episodes 34 and 35 and read how modern-day recent first-time buyers hacked this difficult competitive market and got their offer accepted in 2020. Don’t be discouraged because with the right guru unicorn walking you through this, you can still buy while prices and interest rates are low. Those low mortgage rates are fueling the buying. About everything that comes on the market is getting sold fast, eating away the active inventory. That’s going to be continuing and we’re going to hear that storyline as we go throughout 2021 and in some of the predictions that we hear. Who’s got the crystal ball for 2021? That’s why you’re reading. You’re curious about how to buy a home. How does this work? After 2020, I can tell you this. Nobody knows what’s next. All I can tell you in all I can report to you is some of my lessons from my own studies of the history of the real estate market. My personal events that my clients and I have gone through over the years and most importantly, I consume as much as I can from the leading economists in the world. I listen to everybody. I listen to the super negative Nelly Pessimists and the Rosie Sunshines and butterflies optimists. The truth usually ends up somewhere in the middle. I summarize it all for you because you deserve to know as much as you can before you jump in to this journey of homeownership. Here are some thoughts from some smart people. Lawrence Yun, Chief Economist, National Association of REALTORS, “In 2021. I think rates will be similar or modestly higher, maybe 3%. Mortgage rates will continue to be historically favorable.” I’ll get back to mortgage rates a little bit later and explain what that means for you back to the economists. Danielle Hale, Chief Economist from Realtor.com says, “We expect sales to grow 7% and prices to rise another 5% on top of the 2020s already high levels.” Another, Robert Dietz, Senior Vice President and Chief Economist at the National Association of Home Builders, “With homebuilder confidence near record highs, we expect continued gains for single-family construction, albeit at a lower growth rate than in 2019. Our traffic will remain strong, given favorable demographics and shifting geography of housing demand to lower density markets and historically low-interest rates.” That shifting geography sounds weird. It’s not an earthquake. It’s the new buzz word in real estate. Super hot topic, fire right now. More to come on that. The last quote to start things out for you. This is Mark Fleming, Chief Economist from First American, “Mortgage rates are expected to remain low for the foreseeable future. Millennials will continue forming households, keeping demand robust, even if income growth moderates. Despite the best intentions of home builders to provide more housing supply, the big short in housing supply will continue into 2021 and likely keep house price appreciation flying high.” Those are thoughts. Here’s when people took the crystal ball and tried to give you just the straight numbers. Here is the actual number forecast from some of the big players in real estate. The prediction is of appreciation growth. Some years, some people say a little up some people say a little down. In 2021, these are price change predictions. They all were prices going up in 2020. National Association of Realtors, 6% up, Zelman, a housing research firm, 6% up, Realtor.com 5.7% up, Freddie Mac 2.6% up. CoreLogic, another research data from 2.5% up. Fannie Mae, 2.1% up. MBA, that’s the Mortgage Bankers Association, 2% up. As an average price appreciation from all those prognosticators at 3.9% up. Why so cheery? We’ve been through a big chunk of a freaking global pandemic and the housing market, still remains wrong throughout the pandemic. Our buddy Larry Yun, said this. “It’s different from the great recession. We don’t have subprime lending that’s giving out mortgages to just anyone.” We’ll touch on those issues later with distressed properties forbearance and potential foreclosures and a little bit but let’s keep going and see what else he says. Yun predicts that in the future, he’s thinking 5% to 10% appreciation in 2021. He’s a little more optimistic than the average 3.9% from all those other folks. The reason is that he thinks is a vaccine becomes available and possibly leads to a faster job with still favorable low mortgage interest rates that are going to be hovering around 3%, probably for the whole year. Another expert in the field, Brian Buffini. For years, he has accurately predicted many of the ups and downs and the hidden market trends in real estate. A lot of times, he does that way before it’s on anybody else’s radar. This guy’s a guru who studies his stuff and is awesome. He loves to give it all away. He is someone that I hope to emulate. He emphasized some key things that will affect the market in 2021. First up as the de-centralization in the changing face of relocation. What does that mean? People are moving into the suburbs and beyond. The Washington Post said that the pandemic is making people reconsider city living, trading their traffic for chickens. You know the Californians are hoping that the migration will help to cure our world-famous traffic jams. We still have the Pacific Ocean. I don’t think people are going that far. He said this, “Remote workers are on the move between 14 million to 23 million people plan to relocate due to working remote.” Why not? I can move someplace else and get a bigger house. 20.6% of those 14 to 23 million, 20.6% said they want to move out of the city, bigger house. You don’t need to be right by the office if you don’t have to go into the office. Are you ready for this? Fifty-seven percent of them say that they plan to move more than two hours away from where they currently live. Working remotely can mean anywhere. Something else that Mr. Buffini talks about is upsizing. “People want high-speed internet, kids’ classrooms, more rooms, etc. We’re going to have even more competition in the move upmarket.” The move upmarket is someone selling their starter house and buying another home. The theme for 2021 is going to be not enough homes for buyers to purchase. Click To Tweet What does that have to do with you, the first-time buyer? That means more vacated starter homes for you. More inventory because that’s what we’re going to need. Buffini also said that another major factor for the next three years is that mortgage interest rates will stay low per the Federal Reserve’s guidance. This might not mean anything to you, economists, they fell over when they heard this. Jerome Powell, the Chairman of the Federal Reserve, said something economists have never heard before ever. He said, “We expect to maintain the current rate of somewhere between 0% or 0.25% target range for the federal fund rate. They expect to keep that through 2023.” It wasn’t exact, I paraphrased that a little bit because it’s funky but it’s somewhere between 0% and 0.25%. That’s where they’re keeping the federal rate. If you don’t understand what that means, cool. Let me break it down for you. You can buy more houses for a smaller payment. Here’s how the Federal rate works if you’re curious. The Federal rate only indirectly influences longer-term rates. Investors want a higher rate for a longer-term treasury note but when the yields are low on the treasury notes, they are actually what are driving long-term conventional mortgage interest rates. The true indicator or falling of mortgage interest rates are more closely tied to the ten-year treasury bond market, which is at 1.109% as of January 18th, 2021. You can add about 1.5% to this fluctuating rate to get a good guesstimate of where the national average is going to be for a 30-year fixed mortgage interest rate there. Does that make sense? Let me break down for you one more time. What the Federal said is good for you for like 2 to 3 years. Moving on. Buffini then continued, “Eventually, we’re going to have some sort of inflation. We have to pay the piper for all the stimulus money we needed to get through this. That means higher rates. Remember in the long run though, mortgage rates don’t move. Rents do and especially with inflation. What’s the greatest hedge against inflation? An asset. Real estate is the greatest one and you are guaranteed locked into a ridiculously low rate.” More predictions. Steven Thomas is a local expert here in Southern California. He studies in his expertise in quantitative economics and decision sciences. He says, “The economy dramatically improved but there is still a long way to go. It will take more time due to the slow rollout of the recently approved vaccines. The low-interest rate environment will continue and that’ll be a tailwind that will not only aid in the recovery of the economy but will also continue to fuel the incredible run on housing into 2021. As a result, the market’s going to be hot in 2021.” Here are some more of his forecast. He’s got a famous local forecast here that, in California, what happens here kind of happens nationally. The bigger markets affect what goes on everywhere else. “With very few available well homes to purchase, housing will be extremely hot starting at the beginning of the year. The theme for 2021 is going to be not enough homes for buyers to purchase. Expect the activity to peak around August.” How does that affect the demand? He says this, “With an anemic inventory and record low mortgage rates, buyer demand will be extremely strong for the start of the year through the summer market. With tremendous buyer competition, expect around 6% to 8% appreciation for the year. Demand will be at its strongest and most appreciation will occur from January 2021 through July 2021 and it will downshift during the autumn and holiday markets.” What’s Mr. Thomas’s take on interest rates? He says, “Look for mortgage rates to continue to remain at record low levels until the Coronavirus wave diminishes. Expect rates to rise in 2021 from the record low levels climbing from the current low of 2.66% to 3.5% by the year’s end.” That’s still crazy low. You’re going from the lowest rate in history to 3.5%, which is low. He hits on a hot topic, distressed inventory or potential foreclosures. For those of you out there predicting or perhaps just hoping for a wave of foreclosures because you believe the pandemic means lots of people lost. Lots of people lost their income and can’t pay on their mortgages. Makes sense. It’s totally logical. Here are the facts. Steven Thomas says, “In 2020, distressed sales, foreclosures and short sales only accounted for 0.6% of all closed sales in Southern California. There will be more distressed sales in 2021 due to the pandemic and forbearance.” If you’re a nerd like me, you know what that means. You out there, maybe you heard that word for the first year this time. Forbearance is the banks giving you a break on your loan payments since the air can kill you. A lot of people lost jobs and people are having a tough time going to work if their office is closed and they can’t work remotely. That’s forbearance. The government has given everybody a break but get this. Ninety percent of homeowners in forbearance have more than 10% equity in their house. That’s enough equity to sell the house and avert going into a distressed position. There are 2.7 million homeowners who are currently in forbearance across the US since 90% of those have enough equity to sell which leaves 270,000, 10%, vulnerable to becoming either a foreclosure or what we call a short sale. Many will be able to make their monthly payment. After coming out of forbearance, the bottom line is will there be an increase in the distressed inventory. It will not be a wave. It’s going to be more of a ripple, rising to only about 1% of all homes for sale in foreclosure. If you’re one of those folks thinking that you’re going to get a deal because a lot of people lost their jobs, it sucks for them but we do what we got to do. You’re going to pick up a foreclosure. Do this right now. One percent of all homes possibly in foreclosure for 2021. Go to Zillow and look at the area you want to buy a home then save 100 of them. Only one of those is going to be a foreclosure in 2021. What are the odds that is the home that you like? I’m going to get into this a little bit because I keep hearing from friends and other instant Google experts that there’s no way that we don’t see a wave of foreclosures and so many people lost their jobs in the COVID crisis. I have many thoughts on this. I have some data to back up the fact that it’s not going to happen. The people are not upside down in their homes, they have a little equity in their position but instead of me spewing, I’m going to have some expert opinions I’d like to share with you about that. At the onset of the economic disruptions caused by the COVID pandemic, the government quickly put into place the forbearance plans to allow homeowners to remain in their homes without making their monthly mortgage payments. Almost three million households. This is from a different report. Steven had 2.7 million, they’re saying about 3 million, it’s pretty close. They must’ve done the reports at different times. They’re active in forbearance. Though 29.4 million of those currently in forbearance have actually continued to stay current on their payments. That’s interesting. Three million homeowners have been given permission not to make their payments, the question is how many of them will be able to catch up after their forbearance program ends? The speculation that a forthcoming wave of foreclosures could be a result and that could lead to another crash in home values like we saw in 2008. That speculation’s different. The report says that the situation is much different than 2006 to 2008. That was the housing crisis when we saw any homeowners lose their homes, it’s different because nowadays homeowners have tremendous amounts of equity in their homes. Here’s what some experts think. Michael Sklarz, the President at Collateral Analytics, says, “We may well see a meaningful increase in the number of homes listed for sale as the borrowers choose to sell at what is arguably at an intermediate top of the market and then downsize to more affordable homes rather than face foreclosure.” In other words, they have enough equity in their home or profit to sell the home and they can pay back the forbearance and they’ll still have money to maybe buy something smaller or have rent money for several years. The next economist, Odeta Kushi, Deputy Chief Economist at First American says, “The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home or tapping into their equity through a refinance to help weather the economic shock. It is a lack of sufficient equity, the second component of the dual trigger, that causes a series delinquency to become a foreclosure.” Smart people saying the same thing, using different fancy words. Speaking of fancy words, Donald Layton, Senior Industry Fellow at the Joint Center of Housing Studies of Harvard University. Let’s see what this fellow Donald has to say. “With a greater cushion of equity, troubled homeowners have dramatically approved options, a greater ability to access funding. For example, home equity lines, to keep paying their monthly expenses until family finances might recover, an improved ability to qualify for and support a loan modification. If push comes to shove, the ability to sell the home and monetize their increased net worth while we’re dosing monthly payment obligations. What should lenders expect? A large number of foreclosures or only a modest increase? I believe the latter.” Homeownership is still a better deal than renting despite rapidly escalating home prices. Click To Tweet Mr. Don said basically the same thing other people said but just with a whole bunch of Harvard snootiness. If you’re waiting for a foreclosure, people have equity and they’re going to find another way out. Nobody wants to take that route. They’re going to use the equity and figure something out. If push comes to shove because supply and demand are so out of control, the market actually has the potential to absorb 500,000 homes in 2021 without it causing home values to depreciate. Even if they take 500,000 distressed homes, it’s not going to mean that you’re getting them for a discount price. I wish you could scoop up a rocking fixer-upper of a deal but you’re more likely to buy it closer to market value when these folks bail on the house, by selling it in a standard sale. That’s what’s going to happen in 2021. Timing is everything in the way the real estate market works. If there was a chance for you to buy a foreclosure and get a smoking deal, it actually was out there 2009, 2010 and 2011. Obviously, if you’re reading this, you weren’t in a position to buy a house. Instead, you have to take the market at its current situation and make the best of it.
Making Sense Of The NumbersDo you want more professional prognostications for 2021 and more expert analysis? Let’s do it. A January 2021 study from ATTOM Data Solutions, they’re a real estate research firm. They say ownership is a better deal than renting despite rapidly escalating home prices over the last few months. Owning a medium-priced three-bedroom home is more affordable than renting a three-bedroom property in 63% or 527 of the 915 US counties analyzed. Sixty-three percent of the counties, it was actually better and more financially efficient for you to be owning instead of renting. Todd Teta, the Chief Product Officer with ATTOM Data Solutions said this, “Home prices are rising faster than the rents and wages and a majority of the country, yet homeownership is still more affordable as amazingly low mortgage interest rates that drop below 3% are helping to keep the cost of rising home prices in check. It’s startling to see that kind of a trend. It shows how the cost of renting has been relatively high compared to the cost of homeownership. Right now, owning a home still appears to be a financially sound choice for those who can’t afford it.” Homeownership was found to be the most affordable in counties with populations of less than 1 million and particularly even more affordable in counties with a population of less than 500,000. That’s what the study showed. The more affordable homeownership markets tend to be located in the South of the Midwest and the least affordable tend to be in the West and the North East. Here’s a couple of samples for you to let you know about some areas of the country that are affordable compared to renting. St. Louis County, Missouri, Pinellas County by Tampa in Florida, Milwaukee County, Wisconsin, Marin County, Indianapolis, Indiana and Shelby County in Memphis, Tennessee. That’s to name a few. Sam Khater from Freddie Mac, he’s their Chief Economist. He said this, “The housing market continues to surge higher and support an otherwise stagnant economy that has lost momentum in the last couple of months. Mortgage rates are at record lows and pushing many prospective home buyers off of the sidelines and into the market. Purchase demand shows no real signs of waning at all heading into next year.” There’s a bunch of stuff that I read about and a whole bunch of things regarding the GDP and the basic economic growth and all kinds of stuff. There’s a little one that I want to mention. The unemployment rate continued to actually drop through COVID as more people returned to work. The other big thing is remote work became a more common practice. People are getting back to work with low-interest rates. That means monthly payments are even lower. If you’re one of the lucky folks who are back to work and your job is there or you’re an essential worker or something like that, ultimately, you’re finding an increase in buyer’s home affordability. The pandemic sucked. It’s sucked worse than Jar Jar Binks, sucked worse than Sonic the Hedgehog’s teeth. It sucked worse than Cats the movie. It sucked worse than all those things combined. 2020 might’ve gotten us all a little salty, however, the overall real estate market weathered that storm. It looks set to continue to flex in 2021. It’s crazy.
Bleak ProjectionsLet’s make this fair and balanced. How about some bleaker projections? Here’s the thing. I did the research for you and me and it was super hard for me to find anyone being negative on the internet. I told you I’d put the work in for you because I care. I had to dig deep. I found some people online that were excited to bitch to me. The numbers can be interpreted in many different ways. It’s easy to take the data and skew it however you want to. Here are some of the more rational, negative data that I saw that actually could be something that you need to put into your thinking cap and figure out what’s right for you. In every other recession since the height of interest rates in 1981, whenever we had a recession, the trick that they would do is would lower mortgage interest rates to spur the economy, give it a little kick in the butt. Based on history, this strategy worked well and it helped pull us out of the recessions that we’ve had in the past. In this current recession, we can’t use mortgage interest rates to get us out of the COVID recession. The rates are already on the floor. Combine this fact with the uncertainty of our future, where the only thing we know for sure is that change is inevitable and who’s too if we should be expecting that inevitable change to be positive. It could be time to run for the bunker, cash out your Bitcoins, sell your sneaker collection, buy lots of toilet paper and canned food. Here’s another one. What about this? The question is will robust house-buying power be enough to offset the price appreciation? In other words, your low-interest rate means you can buy a big house but if the price keeps going up, when do you get priced out of it? How does it work? According to Redfin, half of the renters out there express some optimism about the housing market in 2021. They may be drawn to record low mortgage rates and the possibility of greater inventory as the vaccine comes out and we come into the summer months but renters hoping to become first-time homebuyers are also more discouraged by rising prices and too much competition. Many first-time buyers are being priced out of the housing market as inventory shortages persist. Adding to the woes, those prices have continued to rise. Our buddy, Larry, Mr. Yun, he told this to Newsweek, that’s a magazine. “People who can work from home or have exposure to the stock market have done well in 2020. Those on the front lines at restaurants, hotels and grocery stores who tend to be renters, have not. Housing affordability, which has greatly benefited from falling mortgage rates, is now being challenged due to record-high home prices. That could put a strain on some potential consumers, particularly first-time home buyers.” Do me a favor, search the internet and try to find somebody else who’s quoting to you that the leading economist from the National Association of Realtors is telling you that it’s going to be tough for first-time homebuyers. You’re going to read it all here. That’s both sides, real data, no BS sales pitch. I’m giving it to you straight. Knowledge is power and I want to give it to you all because when you take in the big picture, you’re going to be able to figure out exactly what’s going to work best for you. My biggest takeaway from being your super-nerd research boy locked in the basement is this. Most economists see the low-interest rates in high demand, continuing in this rising market, going for maybe another couple of years. A lot of that has to do with the Feds keeping the rates low. What does that mean for you? Is that good or bad if you’re trying to get in the market? Here’s a little thing to think about. I hear lots of first-time buyers telling me they want to try and time the market to buy for cheaper. Remember what I told you, if you’re trying to time then you have to get a time machine and go back to 2008, ‘09, ‘10 and ‘11. Remember, this purchase, it’s different than any other one that you make because you already pay for housing every month and you get nothing to show for it as a renter. This is not like if you go on Amazon and click one of those apps, Honey or now Capital One has one that’ll tell you when the price drops. It’s not something that you haven’t bought yet and you can buy whenever. This is something that you’re already paying for every month because you pay rent. Think of it this way, if we believe the economists and why not, after all, can you imagine the sacrifice those people had to make, being an Economics major in college? If you’re trying to time your first home purchase when prices are low, you would need a time machine to take you back to 2008-2011. Click To Tweet I’m sure that their get-togethers were not the Campus Rangers. They say that the very top, it might be a few years away. For you, consider the fact that it might be worth getting in the fight to get in there in 2021. If you can or at least if you can start your plan to get ready towards the middle of the end of the year, at least you can catch some of the remaining appreciation before the market starts to plateau or flatten out. If you try to time it, if you’re waiting for it to come back down, here’s the reality of that calendar. This is how it works. First, January 2021, you wait. Maybe the market two years of going up then one year flat and then two years of going down to get right back to where we are in January 2021. Five years that you spent paying rent, putting no money into an asset that you own yourself. Instead, you’re actually paying for the landlord’s asset and not to mention each year you missed out on $5,000, $6,000, $7,000, maybe $10,000 worth of tax benefits. That’s the mortgage interest tax deduction. If you don’t know what that means, go back to Episode 27. Five years, your break, even you spend all that money and you didn’t get any of the tax benefits. Who knows where mortgage interest rates are at that time? You have to wait 2 or 3 more years to get the big discount that you were looking for while you were trying to time the market. That’s 7, 8 years of renting and burning money and buying in. Who knows where the heck we’re going to be in 7, 8 years? 2020 ended. What the heck were you doing in 2012? It’s not like we could figure things out and it’s not like we have any way to predict what’s going to be happening in the future. The pandemic didn’t do the huge price drop that you were hoping for. I’m supposed to be Captain Positive telling you it’s going to be tough to buy a home in 2021 with all the competition and rising prices. That was happening all 2019, too. Home sales increased during a freaking global pandemic. Did 2020 hurt first-time homebuyers? No. As a matter of fact, the market share of first-time homebuyers stayed pretty much where it always is, right around 32%. That’s exactly equal from 2020 to 2019. We’re always somewhere between that 31% to 34% over the past few years and those buyers in the average number of first-time buyers, took advantage of the lowest rates in history. At the time, they were the lowest at 3.39%. That historically low rate in 2019, it’s being crushed by nowadays’ rates. The Federal Reserve is going to be doing all they can to help keep it there for a while. Jump in. Forget the prices. I don’t mean forget the prices but forget the prices. The rate is what gets you more for your money. Think of it this way, the same $200,000 house would’ve cost you $139 more per month if you bought it with 2019’s rate compared to 2021’s rate. A $400,000 house would’ve been $270 more a month. You can buy more homes or perhaps maybe you could buy the exact same amount of homes to make up for the fact that the prices have gone up in a year. I could have bought that home. I can buy the same home for the same monthly payment because the interest rates are lower. If you don’t understand that, go back and think about it again. You can buy the same house even if the price has gone up for the same monthly payment you would have paid in 2019 because your interest rate would have been 3.39%. Now your interest rate might be 2.66%, 2.75%, who knows? You might be reading this a few years from 2021 and all these numbers don’t mean squat. Open your mind and your positive energy to be a 2021 success story. Listen to the facts, listen to the data, check this out. This is a DM I got from a listener as I was getting ready to put my notes together for the show. January 18th, 2021, the listener of the podcast says, “David, I wanted to thank you. You gave me, a 25-year-old hairstylist, the confidence to buy a home during a pandemic. Thank you so much for making the numbers in the process not so scary. I started listening to your podcast at the end of September 2020 and I closed on my little dream home. I truly wouldn’t have thought I could do it if I didn’t find your podcast. My mortgage, home insurance, mortgage insurance and taxes are $100 less than my current rent.” Let me preach that again. Hallelujah. Can I get an amen? I can’t think of a better place to end this quote, unquote Fest. If you haven’t written a review and you found this information helpful, please help others find it by taking a few minutes to give it five stars. If you could write a short review, write anything, even one sentence. The more reviews, then the more that we get, the more people that can help find us and get the inspiration and the real information that they so desperately need. My hairstylist found me because the show was moving up on the charts because we got the reviews and the stars. Please get on there, help us get out there and help more people. If you want specific help hit me up anytime on Instagram, it’s @DavidSidoni and there’s a private Facebook page for readers at the How to Buy A Home page, How To Buy A Home on Facebook. You can also find David Sidoni on YouTube and Twitter. Soon I expect to be popping on Instagram reels. You can check that craziness out. Thanks for being here. Remember, you let me handle all the boring research. You just read and reach out to me if you need help and you want to start a plan. I can give you some specific tips to get on your way because I believe in you. You can do this.
- Episode 34 – How First Time Home Buyers Were Affected By COVID In 2020 – Part 1
- Episode 35 – How First Time Home Buyers Were Affected By COVID In 2020 – Part 2
- Lawrence Yun – LinkedIn
- Robert Dietz – LinkedIn
- Mark Fleming – LinkedIn
- Brian Buffini – LinkedIn
- Michael Sklarz – LinkedIn
- Odeta Kushi – LinkedIn
- Todd Teta – LinkedIn
- Episode 27 – How To Financially Prepare To Buy Your First Home – Part VII
- @DavidSidoni – Instagram
- How To Buy A Home – Facebook
- YouTube – David Sidoni & Associates Real Estate
- Twitter – David Sidoni