I received the following question this week from a reader whose situation is probably similar to many other readers of these pages:
I was a big follower of this site during 2006-2009 and felt pretty informed/unsurprised when the original bubble burst. I’ve been busy since then, got married, went through grad school, got a good job, and am now thinking about buying a home. I’m curious what you all think about that.
We’re looking at prime, walkable neighborhoods in central Seattle, (Wallingford, Capitol Hill, Phinney, Tangletown) and are looking for 3-4 beds / 2 baths, since we’ll be starting a family soon. The interest rates seem really appealing right now, and while I’m confused a bit by the lack of inventory and the recent price bump, it doesn’t seem like it’s a bad time to get in, given what we’re looking for, and our current situation. (Cramped in a nice, but small 1-bedroom apartment).
Obviously I’m a bit concerned about the recent run up, the Fed and the discontinuation of them pouring money in the mortgage market, but I’m unsure how much that’s propping the market up right now. Even if they stop and mortgage rates go up into the 5-6% range, that would likely be paired with a small dip in home prices, and my affordability would probably be similar, no?
If we’re looking to live somewhere for the next ten-plus years, what are your thoughts? What if it were only five years?
It’s good to be cautious after the intensity of the competition and home price increases in the market this spring. While now might not be as good a time to buy as a year ago, I think that someone who chooses to buy today can still make a good purchase.
I think my best advice for avoiding over-paying in any market is probably the “How To: Analyze a ‘Below-Market’ Deal” series that I wrote back in 2010. If you can find a home that you like, can afford, and is a good deal based on comparable sales, nearby rents, and historic pricing, then I say go for it.
The biggest challenge in this specific reader’s case is going to be the location he’s targeting. The “prime” neighborhoods are prime for a reason: Lots of people want to live there. That’s likely going to mean lots of competition on the nice homes, so be prepared for a number of disappointments before you finally land the right home.
What’s your advice for this reader? Is now a good enough time to buy? Why or why not?