Are you on the fence about buying a home in the new year? Don’t let rising interest rates and high inflation keep you from purchasing your dream home. In fact, for some, 2023 may be a great time to buy, according to real estate entrepreneur Nicole Purvy, who has three invaluable tips for buying a home in a recession.
“The good news is that housing prices will continue to drop, which will trigger a shift from a seller’s market to a buyer’s market. There will be a sweet spot where the dip in home prices will compensate for the increased interest rates so you may be able to buy “as much house” as you could in 2021, when the housing market was hot and homebuyers saw that their monthly income allowed them to qualify for a larger, more expensive home due to low rates.”
Tip #1 – Purchase New Construction
Purvy says buyers will get the most bang for their buck for that new construction premium. That’s because builders who started scores of projects during the pandemic-era home buying frenzy are now “stuck with a bunch of new houses that are hard to sell,” so they’ll be more willing to negotiate. When the market shifts to a buyer’s market (which is what we have right now) sellers will often sweeten the deal with concessions that are favorable to purchasers.
Tip #2 – Buy Sooner Rather Than Later
The Fed has already indicated it will continue to raise interest rates through 2023, albeit at a slow pace, to lower inflation from its current 7.5+ percent down to their goal of 2%. The longer you wait, the greater the chances that your mortgage rate will be higher than what they are now.
Tip #3 – Consider Creative Interest Rate Strategies
A seldom used concession is a “mortgage rate buy down.” Consider combining that with a refinance in 18-24 months. Mortgage lenders offer a variety of buy down options, including: 2/1 buy down (the borrower’s rate drops by 2 percentage points in the first year of the mortgage and by 1 point in the second year); or a 1/0 buy down (the borrower’s rate drops by 1 percentage point in the first year of the mortgage).
“I predict that rates will fall in 12-24 months when the Fed gets inflation down to 2%,” noted Purvy. “By the time the mortgage rate buy down ‘expires,’ you can refinance the home at the lower rates if they come down in the timeframe that most economists predict,” added Purvy.
Lastly, said Purvy, is to keep everything in perspective. “Don’t be afraid of current rates, which are high relative to recent times, but on average for the past 100 years rates have been at 7.5% — exactly where they are right now.”
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This article is intended for informational, entertainment or educational purposes only and should not be construed as advice, guidance or counsel. It is provided without warranty of any kind.