“This is such a great place. I wish I could afford it.” This month I put two listings into escrow, one on the high end of the market and the other on the lower end, and I consistently heard this same feedback from buyers. In my lengthy career as a real estate sales person, home buyers have rarely come up to me and made this type of comment with such consistency. Higher interest rates are putting a big squeeze on today’s buyers, but they are still stepping up to the plate in the spring 2023 market. It's not just home sales either. I had plenty of people talking about making lower offers on my rental listing in Corte Madera. All this makes me wonder what we have in store later this year if demand slows and supplies grow?
I Googled today’s 30-year fixed mortgage rate and came up with the following site: https://www.bankrate.com/mortgages/30-year-mortgage-rates/
The answer was a disheartening 6.87%. For people looking to refinance their 30 year fixed mortgages it was 7%. So, let’s do a little math.
My condo listing at 67 Dockside Circle in San Rafael is listed for $569,000. If a person is putting 20% down, they’ll have a mortgage of nearly $3,000. That’s before they pay the monthly HOA fee of $470 and property taxes which will be about $658. That puts the monthly payment at $4,128 for a property that would likely rent for about $2,800/month. How is this affordable and why is this even a good idea you ask?
When buyers put down more money, it brings their payments down. Believe it or not, there are plenty of buyers with more than 20% to put down on their purchases. It’s not unusual to see Marin buyers making between 50-100% cash offers. This may be a phenomenon that is unique to the Bay Area where money is so abundant. I am an anomaly here. Of the three properties I’ve owned I’ve never been able to put down more than 10%. With today’s high interest rates, a guy like me most likely wouldn’t be purchasing property.
Of course, there are tax advantages to owning a home, but they have been mitigated by a higher standard deduction and a $10,000 cap on tax write offs. Even with those negatives, it’s still advantageous to own property because (1) you are paying your own mortgage instead of someone else’s (2) you are gaining equity and appreciation (3) when you own a home nobody can give you 30 or 60 day notice to leave once your lease is up (4) you don’t have to worry about your rent increasing.
There are plenty more reasons to own a home. It’s just a lot harder to afford to get into the market now than it was during the pandemic when interest rates bottomed out in the mid 2’s. The lesson here is that it’s best to own a home as soon as you can afford one, otherwise home prices are likely to keep increasing and the home ownership boat may sail without you.