Main Content

Pros and Cons of Home Buying Right Now

Pros and Cons of Home Buying Right Now

Blog Header (6)-1

Believe it or not, there are some major pros to home buying right now. If the hectic competitiveness of last year’s market left you feeling burnt out, now might be a great time to consider jumping back in.

What a difference a year makes. Twelve months ago, home sellers dictated everything in a real estate transaction. Above asking prices, escalation clauses, waiving home inspections, cash offers and low inventory created a home seller’s bonanza.

Fast forward to the present. Mortgage rates have doubled, inventory is increasing, price drops are commonplace, and home buyers are finding themselves able to negotiate on a bevy of terms and conditions, including price, home inspection items, and closing fees.

It’s been a reversal of fortunes in the world of Denver residential real estate. While home buyers are now enjoying greater leverage when making an offer, home prices in the Denver metro area continue to be elevated. And interest rates at nearly 7 percent for a 30-year fixed loan compound the woes home buyers face. Many would-be home buyers have been forced to the sidelines as a result of not only homeownership expenses but ongoing inflation pressures.  

According to the latest figures from the Denver Metro Realtors Association, the average price of a single-family home in September 2022 was $745,947. This compares to $688,629 in September 2021, representing an 8.32 percent increase. While we are no longer seeing double-digit home value increases year-over-year, real estate continues to show healthy valuations.

To gauge just how much Denver real estate has changed during the last three years (i.e. pre-pandemic), look at these figures from September 2019:

  • The average home price was $535,032
  • Interest rates were 3.6 percent on a 30-year-fixed rate mortgage
  • There were 9,286 active listings compared to 7,683 in September 2022

While home buyers are starting to see price drops and seller’s concessions, it continues to be an uphill battle for many home buyers when it comes to finding a home that fits their budget. Check out these pros and cons of buying a home right now in today’s Denver real estate market.

Pros of Buying a Home Right Now

Time is on your side

Unlike the crazy times of a year ago when an offer was practically needed on the spot, home buyers can now look at a number of homes without the pressure of making a quick offer. Cash offers, escalation clauses, above asking prices and home inspections that only focused on home safety were the norm. Now, with less competition and increased inventory, home buyers have the time to carefully evaluate homes and make a more informed (not emotional) decision on whether to make an offer or not.

Price drops are becoming commonplace

With the residential market starting to shift, it’s a challenging time to price homes. Real estate comps from even a month ago, may not reflect a home value anymore. And as a result, home buyers are starting to see price drops after two or three weeks of a property being on the market. Any motivated home seller is going to be ready to “improve” the price if it means getting an offer. A great tactic is to focus on those homes that reflect a price reduction and further negotiate. This is where your Usaj Realty broker can show their real estate savvy.

Home Seller Concessions

In addition to the price negotiations, home buyers are making inroads on other contract concessions. Your Usaj Realty agent will take the time to discuss all the options available to you during the contract negotiation. Some of the areas you may want to consider include:

  • Home Inspection Repairs: Depending on the condition of the home, the seller may be willing to pay for repairs or extend a credit for necessary fixes. Previously, most home inspections focused on only HVAC, safety features and operating systems of the residence. Now, home buyers have the latitude of asking for other fixes or replacements.
  • Closing Costs: There are a myriad of costs associated with buying a home including escrow, title and recording charges, HOA fees, taxes and pro-rated utility bills. A home seller may be willing to share some of the closing costs.
  • An Interest Rate Buy Down: This technique allows you to obtain a lower interest rate by paying extra up front. Depending on your financial picture, an interest rate buy down might provide you with a more favorable loan and monthly payment, and the home seller may be willing to help pay for it.  

Purchase Contingent on the Sale of Your Home

Over the last several years, home sellers haven’t had to delve into this aspect of a real estate transaction. Now, it’s emerging as one of the tactics that buyers can use to secure a home. This is particularly effective when a home has been on the market for a while and the seller is starting to get nervous. Keep in mind that the seller will include specific language in the contract, and include a deadline for the sale of your home. 

Refinance When Rates Drop

While mortgage rates are higher than we’ve seen in some time, at some point they will decrease. Even if you’re locked into a less-than-desirable rate, after you’ve been in your house for a while you can always refinance and get a lower rate.

Cons of Buying a Home

Selling Your Present Home 

Whether you need a larger space or are relocating, it may take a little longer to sell your current home. Keep this in mind before you start looking for a new home.Make sure you consider your options. Because the market is shifting, it’s imperative you have a good grasp of your finances and understand how much cash you’ll need to get out of your home and conversely, what you’ll be able to afford with your next purchase.

Higher Mortgage Rates

There is no getting around the fact that interest rates reduce your buying power. Rates are nearly double what they were a year ago. As a result, your buying power has diminished and your monthly mortgage payment is likely to be higher than it would have been a year ago. 

Elevated Home Prices

Denver’s real estate market is much different than it was just three years ago. The average price of a single-family home has increased an astonishing 39.5 percent since September of 2019. It’s challenging to afford a $735,000 home with a nearly 7 percent mortgage rate.

For example, say you’ve found a $700,000 home and can put down $100,000 as a down payment. That leaves you carrying a $600,000 loan at 7 percent. Your monthly mortgage payment will be nearly $4,000. 

Bottom Line

It’s a good idea to meet with a mortgage lender to determine whether this is the best time for you to purchase a home. Your finances and loan obligations will be reviewed and you’ll get a much better idea of what you can afford and what your best options will be.

{{cta(‘9c6daed3-7c57-4503-a6e3-5a633bebe456’)}}

At Usaj Realty, we provide personalized support and historical market data to help you, as a home buyer, to fully understand your options. When you are given the tools to effectively navigate the housing market, you are able to design a bright future for yourself and your loved ones. Our mission is simple. It is to be your ally and advocate during your home-buying journey. We want you to have clarity and know what each step entails before you take it. This guide will help remove the guesswork and overwhelm — and ideally, will be a resource for you to refer to time and time again.

{% video_player “embed_player” overrideable=False, type=’hsvideo2′, hide_playlist=True, viral_sharing=False, embed_button=False, autoplay=False, hidden_controls=False, loop=False, muted=False, full_width=False, width=’500′, height=’500′, player_id=’87381808175′, style=” %}

 

{{cta(‘ccccf9f5-79a6-4659-95ec-27051dfac745′,’justifycenter’)}}

Q3_Denver_MarketReport_IG-Single

Skip to content