Why You Should Not Buy a Home During a Boom in the Market
A number of factors have led to rising home prices. Low mortgage rates and more people working remotely resulted in more home-buying during the pandemic. More people want to buy homes now than there are properties currently on the market. This makes buying a home more costly and competitive. Here are some factors you need to consider if you’re thinking about buying a home while the market is booming.
You are more likely to overpay
Anyone who buys a home at the top of the curve may be overpaying and have less opportunity to make money over the long term. Homes often sell above the asking price and many first-time home buyers tend to go over budget.
Don’t do the crazy things some people are doing to get the home they want, including buying it without even seeing it in person or foregoing an important part of the home buying process – in inspections – to get an offer accepted quickly.
If you want to buy a home in a hot market, it is important to get the advice of real estate professionals. Instead of overextending yourself to buy a small home for more money that doesn’t really suit your lifestyle, consider looking at real estate in a country like Costa Rica. Blue Water Properties of Costa Rica offers some of the best Costa Rica real estate. With its beautiful scenery, ideal climate, and proximity to international airports, the country has become a popular choice for those wanting to invest, relocate or retire.
You may be forced to settle
If you buy in a real estate boom, you may be forced to settle. You may end up buying a home at a high price that doesn’t really suit your purposes as you’re competing for a limited number of homes. This means multiple offers are common and they can easily turn into bidding wars.
It is better to wait out a hot market rather than make concessions. For example, if you want to be in an area with good schools, you shouldn’t sacrifice that – you can make cosmetic changes to the home, but you can’t change the location. Take a step back and consider whether a home ticks off the majority of your checkboxes.
You may blow your whole budget
Buyers in a hot market are often forced to put as much as 40-50% down, which can wipe out all your savings if you’re a first-time homebuyer. This can leave you without an emergency fund and deplete you of the money you need for things unexpected repairs and maintenance. You can’t take advantage of any other opportunities to invest or absorb an increase in property tax.
Before you blow your whole budget or settle for a home you don’t really want, give the housing market time to settle down so you can buy a home at a more reasonable price.
The bubble may burst
There is always the chance if you buy a home at the top of the market that the bubble bursts and the housing market crashes. What happens to your investment then? It’s not the end of the world if you can afford to hold on until prices rise again and your home can recover its value. The problem is when you can’t afford to hold on for long enough.
Consider the urgency of your move and if you don’t immediately need more space, wait until you don’t have to pay a premium. If you need to buy immediately, consider the offers you submit and know what’s non-negotiable for you.