Should You Buy a House in 2020?
Should you buy a house in 2020? Of course, this is a question that has a very complicated answer.
Two reasons that the answer is no: prices are high and inventory is low. Yes, interest rates are historically low which makes paying these historically high prices a little more bearable. Low inventory means a couple of things: it's hard to find the home of your dreams at the price you feel you can afford; it's extremely competitive in our market (we had 47 offers on one home in January, and we heard of another house nearby that had over 50 offers and is going $400,000 over the asking price!); also, it means the thought of buying your dream home (or any home) contingent on the sale of your current home is a losing proposition. Would you entertain a contingent sale on your own home? Probably not, because you want to minimize the things that can go wrong with the sale so you can move to the next step in your life without depending on variables you have little or no control over (like the price of the contingent home or the skill of the agent involved).
Despite those issues, I'm in the camp of yes, this is a good year to buy a home. I know what you're thinking - of course the Realtor thinks everyone should by a house right now! But the reason why?
Because I don't think houses are going to get cheaper any time soon. The longer you wait, the higher they get. This has been true for 8-11 years, depending on how you look at it and where you live. And all along the way, people have been predicting a crash. Sooner or later, they'll be right, but I don't believe it's a good idea (or all that realistic, really) to plan your life on when that a crash will be. So you could be renting that apartment that's too small but fairly cheap for the next 5 or 10 years, and if your landlord is on top of it, you'll be paying more rent even if you're in a rent-controlled place. Last year the City of Los Angeles allowed a 4% rent increase, historically it's been at least 3%. That adds up over time.
What are the advantages of buying a home? A big one is that if you go with a fixed rate mortgage (and wow, rates continue to be really low), your payment won't go up, ever. And in California, your property tax won't go up much. Plus, when you get to age 55 or older, you can qualify for significant property tax savings, which I explained in last week's post about Proposition 60/90
But besides cost issues, there are the intangibles: you can fix up your home any way you like (within local laws); inside, you can generally decorate however you like - without a landlord dictating what you're allowed to do; and there is a feeling of being more connected to your community, more likely to get involved in some way with its governance, taking a more public role in institutions like schools, public works and buildings. There is a big feeling of permanence and substance that comes with owning property and investing in a neighborhood. Don't scoff, it's often what gives communities their character.
I don't like the feeling of impermanence renting can come with (the landlord can tell you to leave even with rent-controlled units under certain circumstances). How about you?
If you're thinking that 2020 may be the year you buy a home or make a move, let's discuss the pros and cons! Every person's situation is varied and complex - we'd love to help you figure out the best option for you!