To Buy or Not To Buy in Summer 22
Alot of Renter's are wanting to buy. This is especially so because rents are at all time highs, as are Home Prices. Seller’s are lucky and able to get high dollar … still as of July 2022. The top has likely been hit in price.. in Chicago condos at least. There was a drop in March this year off last years peak in March of 21. So buyer’s will get some relief on price soon.
Here are some thoughts on how to think about buying and if it fits for you right now.
Will you live there for at 5 years?
In my opinion this matters. When you sell or buy it costs money. About 6% between all taxes moving costs, fees and commissions by my estimate - at a minimum. Why it matters: These one-time expenses add up and the longer you stay the more you spread the cost and get the chance for appreciation.
Is it cheaper to rent or own in your area?
You might assume buying is a better money wise because you build equity however, it easily may not be the case if rents hit below a relative prices of home in your area. Work back for your monthly payment and do the math. And, get the advise of a good Broker on whether or not appreciation is likely to occur—ask them for data on the area and the price patterns of there past in this area.
The price-to-rent ratio: This is a MM rent figure. Take the rent and multiply it by 12and annualize it. Then divide the purchase price of a similar property by the annual rent total. If that comes out to ratio greater than 18 then know that in my opinion it weighs in favor of renting, while a figure less than 18 generally sends a green light to buying.
If you cannot count on appreciation over 5 years would you still buy?
Home prices went up historically but we are at a high point for the moment. Noone can tell if we are headed upward from here. If you are ok with a flatline then it should not stop you in my opinion. But obviously chances are… the longer you stay… you will find decent appreciation.. especially due to the overall housing shortage in the country. You can also control your destiny by updating the home in a way to add value… by getting Realtor advise up front, before you spend the money. Pools = bad investment. Kitchens = excellent investment. Adding Heated square footage = The best possible investment (finishing an attic/ basement ).
How do you feel - what does your gut tell you?
Buying is not only a data driven thing… you have school issues, kids, playdates, etc. all the things to wind into the situation.. providing a future home for yourself and your family .. and the emotional feel of where you live are really the most important factors. Checking in with yourself is good… but getting a few others to help you unwind your reasoning who you trust is a good things to do — especially if they are not a close friend, but someone who can be objective and someone you trust.
If your thinking these things over give me a call.. I’m here to think it over.
