Buying a home is one of the most meaningful and potentially transformative events of most people’s lifetime. It’s also one of the most financially substantial. To this end, it shouldn’t be an impulsive choice but a decision that’s arrived at after careful, in-depth deliberation.
In the real estate sphere, the past two years were simultaneously thrilling and daunting for buyers but a boon for sellers. A widespread increase in demand, coupled with rapidly-diminishing inventory, led to a historic run on home sales. Bidding wars and waived contingencies were the norms. In Hawaii alone, six in 10 homes sold above their listing price.
But as we move deeper into a radically different market, you may be asking, is it still a good time to buy?
In a word: Yes. Read on for Oahu real estate expert Sean Sonoda’s reasons why.
The opportunity to refinance in the future
The spike in mortgage interest rates has fueled a large part of the real estate market’s cooldown. In November of 2022, the average mortgage loan interest rate was 6.91%. The increase has left buyers, sellers, and particularly the media balking. And while it’s true that interest rates reached a 12-year record high of 5.11% in May of 2022, they are still considerably less than what they were in decades past.
Moreover, experts suggest that the interest rate for a 30-year fixed mortgage will hover between 4.8% and 5.5% when 2022 comes to an end. True, 2023 will be here before we know it, but even if interest rates sway in the other direction, it may be to your benefit to purchase a home now and refinance in the future once rates have gone down.
Alternatively, you could apply for an adjustable mortgage rate, which might translate to putting less money down.
Increased leverage during negotiations
The past couple of years were overwhelmingly a seller’s market. Under these conditions, buyers were forced–or at least compelled–to forgo contingencies to “win” bidding wars. This meant typical terms, like inspections, went out the window.
Those rising mortgage interest rates, however, have prompted many prospective buyers to press pause on their plans. With less competition, you may have more power during negotiations and be able to score the contingencies you wish.
Keep in mind, however, that this will depend on where you intend to buy. Some regions are still unequivocally in the seller’s favor.
A more leisurely pace to browse homes
The pace of the real estate market in recent years was downright frenetic. This urged buyers to act fast and, we can assume, impulsively. With fewer buyers currently looking and bidding wars becoming increasingly less prevalent, you may be able to operate at a more mindful tempo to ensure you don’t experience buyer’s remorse. Indeed, homes remain on the market for longer, which grants you more time to view more properties before deciding to put in a purchase offer.
Bonus tip: Prior to hitting the market running, compose a list of your wishes and needs to hone in on what will leave you thoroughly satisfied.
Potentially lower prices
Naturally, the median home price you can expect to find in your area is contingent upon where you’ve set your eyes. If you’re searching for a home on Oahu, for example, you can expect to see several different median home prices across the island: The median price for a single-family home in Waipahu is $956,500. In Mililani, it’s $1.09 million. Nonetheless, other parts of the country are seeing a decline in home prices, down 6% from January 2022. Forbes also reports that buyers are in a position, at last, where they don’t have to put in purchase offers that are above the asking price. Yes, if you will be financing your home purchase, you will have to pay a higher interest rate, at least for a time. But with dwindling, more financially feasible home prices, depending on your desired area, you may also be able to get a terrific deal, thereby leveling it out. You may even be able to negotiate a lower price, especially if a home has been on the market for some time.
Investors may be taking a step back
Forbes also asserts that investment purchases reached a plateau in 2022. This may give you more leeway as a buyer, namely in the form of decreased competition.
The price of rent will continue to rise
This heading alone may make you sigh, as tenants across the nation have already witnessed hikes in their monthly rents. Unfortunately, for some, that’s not going anywhere anytime soon. In fact, experts predict that rental costs will persist in climbing into 2023, and it’s sometimes wiser to buy rather than rent. On the flip side, you might be in the market to purchase an investment that can be used as a long-term rental property. In this case, the escalating cost of rent may work in your favor.
It’s always an opportune time to work with a realtor
No one can answer the question of “is now a good time to buy?” better than your local, seasoned real estate agent. An expert real estate agent will have invaluable insights into your specific market and will assess your circumstances to provide you with a reliable, honest answer. And if the answer is yes, they can direct you towards a property that will fulfill, if not exceed, your wishes. What’s more, given the calmer pace of the real estate market, you may have more of your real estate agent’s time, energy, and attention.
Sean Sonoda falls into this camp of real estate agents, although he’s always prepared to give his clients his time, expert guidance, and enthusiasm. Whether you’re interested in Kaneohe real estate or have just begun searching for Pearl City homes for sale, he can provide you with invaluable assistance throughout every step of your real estate journey. Schedule a consultation with him today to experience what it means to work with a real estate agent who epitomizes integrity.