Housing Market and Interest Rates and the Equity Train: Why it is STILL the Right Time to Buy.

How many times have you heard someone say or said to yourself: “I am going to wait to buy a home”. “I heard the home prices will crash”. “Rates are too high right now”. If this is you, it is time to change your mindset from a Renter to a Homeowner, and subsequent INVESTOR. I am asked occasionally, “when is the right time to buy a home”? My answer is always, YESTERDAY. There are many reasons why almost any time is the right time to buy a home. Let’s have a light exploration on the housing market, interest rates, and (what I have dubbed), the Equity Train.

The Housing Market:

According to the Honolulu Board of Realtors’ 36-year historical sales data on www. hicentral.com, the average appreciation on condo/ townhouses and single-family homes is 4.42% and 4.54%, respectively as of the end of 2021. We experience highs and lows, but always have performed at a higher rate of return than most mediumrisk investment options. It is a solid investment strategy, especially as a primary resident. What makes a home so advantageous to invest in?

• You can live in it. How much do you give back to yourself from your monthly rent payment? The answer is 0 dollars and 0 cents. You will earn home value over time as an owner.

• You can insure it. You cannot insure a stock, but if your roof flies off in a windstorm (with the appropriate insurance coverage), you are covered. When the market crashes and you lose your value on a 401k, crypto or stock, there is no coverage. Nobody will tell you, “Sorry for your loss. Here is your stock value back”.

• You can see/touch it (tangible). Stock, crypto, an IRA and other likewise investment options are intangible. You know the home is where you left it.

• You can improve it. You cannot print a stock or a crypto balance on fresh paper to make it more valuable, but you can renovate a home and raise it’s worth!

Interest Rates:

Let’s be honest. The pandemic has spoiled homeowners with historically rock-bottom rates. Rates in today’s market have now entered 6%. For those that were not homeowners way back when, we’re seeing rates comparable to the 2008, 2009 timeframe. What is different now you ask? Long story very short, the housing market has less inventory and federal regulations in 2010 tighten up the previous high-risk mortgage lending practices. This asserts that we are not expecting a housing market meltdown as previously experienced over a decade ago, and all creditable experts affirm this. The question to ask yourself is: “Are there homeowners that still own their property now that bought before or during this last high-rate market”, and if so, “Did they STILL earn equity over time”? The answer is undoubtedly and unequivocally, YES.

The Equity Train:

Let’s do some simple math, shall we? HOME APPRECIATION = EQUITY. EQUITY = FUTURE WEALTH. This wealth can be expressed as future cashflow on rental property when you move out, or a comfortable nest egg of cash in the future when you decide to sell, or pass wealth to your children by liquidating your estate at passing, or finance against your home’s future value for smart investment strategies. To partake in these future benefits, you must get on the Equity Train.

In the historical sales data above, you see that homes are more expensive every year. For those who bought a home, your home EARNS value yearover- year. Congratulations! You are on the Equity Train! You bought a ticket to ride when the ticket was at a lower cost. If we were doing math, the fraction would be: HOME VALUE – EXISTING MORTGAGE BALANCE = EQUITY. Your ticket to ride the Equity Train was cheaper year-over-year than anyone else getting on the ride later. If you got on the Equity Train when the rates were high, no problem! You can ALWAYS change a rate, but you CANNOT reverse time and buy a home you skipped out on. What happens if we do not get on the Equity Train now? Estimated home appreciation will increase home prices. This means you will need to qualify for a higher home price, have more of a minimum down payment, and miss out on equity gain.

With this said, remember, you can always change a rate. You cannot reverse time and buy a home. Get on the Equity Train before the ticket is more expensive and you’re left at the station while others are enjoying the homeownership ride. Give me a call. Let’s see how you can punch your ticket and get you riding!

Rick Yniguez
Director of CCM
Warrior for Life (WFL) Group
NMLS1823240
M 808.462.7318
E rick.yniguez@myccmortgage.com
CrossCountry Mortgage | 3555 Harding Avenue, #100 Honolulu, HI 96816 | NMLS3029 NMLS1379257 Equal Housing Opportunity. All loans are subject to underwriting approval. Certain restrictions apply. Call for details. CrossCountry Mortgage, LLC. NMLS3029 (www.nmlsconsumeraccess.org)

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