Over the next 12 months, housing inventory will slowly increase and there will hopefully be some additional choices for those buyers sitting and waiting in their “wealth depleting rentals.”
At this point, prices have increased with the existing inventory that is selling and due to lack of inventory and a slight slowdown in sales (although August was up, compared to July).
One advantage for the buyers for the higher end of the market will be smaller price increases or in some situations prices becoming flat or lower with little or no increases, as the market slightly softens, due to a reduction in demand.
However, when the Fed increases the rate another quarter point in December, as it appears they will and again, several times in 2019, the slower increase in prices will be offset by the greater monthly cost of carrying one’s mortgage.
Another plus for the purchasers is the demand may not be increasing at the same pace as it has been over the last several years, most assuredly due to gradually increasing interest rates, much higher prices and those exiting New York to lower priced states.
The result will be many headlines written to address the impact that these two situations will have on home values.
Many of these headline writers will confuse “softening home prices” with falling home prices,” but there is a major difference between the two.
The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices).
This does not mean that prices are depreciating (falling prices). Here is an example: Over the last several years, local home values have appreciated around 6.2-6.9 percent.
So, if you had a home worth, let’s say $650,000 at the beginning of the year and for argument’s sake, it increased 6.5 percent in one year ($42,250) then it went to $692,250. Let’s say the appreciation rate “falls” to 5 percent, the next year, then the $650,000 home would be worth ($32,500 more) $682,500 a $9,750 difference, but still a very nice increase for just living and enjoying one’s home.
So the price of the home didn’t fall. It just didn’t increase at the level it had the previous year.
Appreciation rates are projected to end this year @ around 5% and then drop to somewhere between 4-5 percent in 2019. This drop in the appreciation rate will cause home price increases to soften, but not fall!
Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.
If you are a buyer and are qualified to purchase, but are sitting on the sidelines, waiting for that perfect “picket fence” home, begin thinking about “trade-offs.”
It’s either your wealth, slowly being given away to your landlord or a few “must haves” or you won’t buy. You need to get into the “buy zone”, even it is a coop or a condo, whichever is most affordable that you are qualified for.
Besides the appreciation, remember those tax deductions too, to me it’s a “no brainer.” I am sure many buyers are looking at the escalation in prices and the interest rate increases over the last three years, causing some to put buying on hold.
However, watch what happens to rents going forward.
As more and more people either stay in their rentals and others go into rentals, due to the unaffordability of purchasing; also watch out for the increases in rents, when you sign the next year’s lease.
You can always try to move to another more moderately priced rental if there are any in the neighborhood or school district that you are residing in. Most critical, is pulling your children out of one school district into an entirely different one, can be extremely traumatic.
I had a tenant who was going to sign a lease to move into a different town from where she currently lived; but her son went ballistic, knowing he would lose most of his friends. Even though she would be moving to a much more highly rated school district, to the benefit of her son; she ended up not signing the lease at the last minute and staying where she was. There are still more choices in purchasing than renting.
But good luck in your search either way; but if you need assistance in figuring out whether you qualify to buy, reach out to me and I and my mortgage person will do our best to help you.
Philp A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular “FREE” updates of sold homes in your area and what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at: Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.
