Why Buy Now?

I’m always self conscious about how much I might sound like a cliche TV show realtor, prodding people to “BUY NOW!” When that is actually the appropriate advice though, I always try to make that objective. First, glance at these two infographics at the bottom for lots of aggregate data. Notice these numbers suggest that if you’d bought in April, after only FOUR months your home would be worth 9% more. That’s the kind of pace we’re on right now, arguably more than 2% appreciation per month this summer! So if that’s the case, what does that mean for the person who wants to wait? That means that every month they do, the home gets 2% more expensive (if trends continue). How much of that 2% do you want to realize on your own balance sheet?

Year over year at the end of August, the median price has gone up more than 11.1% and the average 19.2%! Some of this high number is simply because there is construction of some larger homes, but you still have incredible stats at the square footage price level, in which the median has gone up 7.7% and the average 8.5%

But WILL this trend continue? What if the bottom falls out? Well, note the sources below for another crucial statistic- “months of inventory.” Notice in this four month period we’ve plummeted to 1.4 months of inventory. They say that 6 months of inventory is equilibrium. Above six months is a buyer’s market, and below it is a seller’s market. We’re in VERY seller’s market range. That means that there are about 4.3 buyers for every one seller. That’s your competition. If you’re looking for homes in the lower price ranges, unfortunately your competition is even worse. Based on your search area and budget, it might be 7-8 buyers to every one seller in specific market segments! What all this means is that as long as we have such a lack of inventory, strong appreciation will continue. It’s just supply and demand. If economic conditions were to get REALLY bad all of a sudden, I still don’t think Austin would flip to a buyers market— not ANYTIME soon. This 1.4 months of inventory number… that’s a number that has to be slowly chipped away at. It’s not something you flip overnight. We have 11% appreciation year over year, and it would not surprise me in the least if we have 10% or more for the next year. If I’m too optimistic, half that much appreciation (5%) is still great!

So bottom line: the more you wait, the more it will cost. Interest rates are also at pretty near their all time lows, and money will not continue to be this cheap forever either. It’s a rough market to be a buyer in, but if you want to buy in Austin, and you CAN buy now, I’d say there are several arguments for why now is better than later, financially.

Before wrapping up, I just wanted to comment on one possible thought you might have… “Isn’t that just what realtors say? Isn’t RIGHT NOW always the time to buy, in their opinion?” Maybe we’re guilty of that sometimes (I won’t defend everyone), but when rates are low and appreciation is high, then yes, the advice will be almost the same every month. From a financial perspective, each passing month is a better time to buy than a future month. Of course I know it’s not all about finances, and a home is also so much about establishing a “home” that is right for your family. Only you will be able to make that determination. In this post though I just wanted to give commentary on the financial aspect of purchasing. Please don’t hesitate to reach out if there are any follow up questions I can answer for you.

Note: the appreciation in these infographics are year over year, comparing the same month from the previous year.