Why I Will Keep Buying Houses Despite “The Current Market Conditions”

Desiree Peralta
Photo by Matheus BertelliPhoto byMatheus Bertelli / Pexels

You don’t have to be an expert to know that the real estate market is in a big “bubble” right now.

Mortgage rates for a 30-year fixed-rate loan are above 7%. Houses have a ridiculous price increase, costing up to 100% more than their value two years ago. And it is challenging to find a fair deal on a well-conditioned house if you don’t have any experience.

Many people advise you to keep renting if you are not desperate enough to buy a house. Mainly because “it would be cheaper to just rent” than compete with the ridiculous house loans:

“Let’s say you can put 10% down. That’s $44,000 up front, just for the down payment. At a 7% interest rate on a 30-year mortgage, you’re looking at a monthly payment of about $3,400, including property taxes and insurance. To afford this payment — using the don’t spend more than 30% of your income on housing standard — you need to earn roughly $11,333 a month, or approximately $136,000 a year.”

This advice may sound logical if you are comparing your current rent price vs. a loan for a house. However, if you are an investor, this is why you should keep buying houses now based on my experience with this wild market.

This is still the best time to buy a house if you are planning to retire with Real Estate.

Although housing prices have grown significantly in recent years, nothing confirms this will change. In fact, many experts say that the housing market is not going to crash for several logical reasons:

“Housing economists agree that prices could fall, but the decline won’t be as severe as the one homeowners experienced during the Great Recession. One obvious difference between now and then is that homeowners’ personal balance sheets are much stronger today than they were 15 years ago.

The typical homeowner with a mortgage has stellar credit, a ton of home equity and a fixed-rate mortgage locked in at a rate well below 5 percent — in fact, according to a June Redfin study, 82.4 percent of all current homeowners are locked in below the 5 percent mark.

What’s more, builders remember the Great Recession all too well, and they’ve been cautious about their pace of construction. The result is an ongoing shortage of homes for sale. “We simply don’t have enough inventory,” Yun said. “Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.””

So basically, there are not enough houses for sale to meet the demand of the people who want to buy homes. Even though there are new constructions, they are not quick enough to meet those demands. And in very populated areas like big cities, there are only small areas to create new buildings, so the prices there will be more than fixed for now.

Many people don’t buy anything now because they want to wait until the prices decrease so they can take advantage of good prices. However, like in any market that suffers from ups and downs, nobody can really predict when that will happen or what the bottom of that “down period” will be.

So even if you have your money ready to wait until prices decrease, it is probable that you never know what those reduced prices are until they have already happened.

I bought my first house just before the pandemic. It was a small home on the city’s outskirts, and many people thought it was a bad deal because of its location.

When the pandemic hit, I thought I would lose my money. However, the opposite happened. I bought the apartment for $50,000, and after the pandemic, it is worth $95,000.

There, I understood something important: no matter what happens with the world, people will always need a place to live.

A 7% interest rate is not a bad deal for a business, especially if you plan to pay it with rent.

My brother bought an apartment in New York a few years ago. When his son was born, he decided that he wanted a house for his family’s comfort.

Many people thought he was making a wrong decision because he already had his own home almost completely paid, and it was ridiculous to pay a more extensive mortgage again just because he wanted a backyard.

Despite that, he decided to buy it. Instead of in NYC (which is one of the most expensive places in the United States), he decided to do it outside the city, so it was cheaper. In addition, he found some tenants for his NYC apartment who are paying him the loan of his current house. So he continues to pay exactly the same as he did, but now he has two properties.

A 7% interest loan is not a bad deal if the business is making enough to pay for that loan.

Many people think that 7% is too much and that you will be throwing your money away after a long period of paying interest, property taxes, insurance, and all other expenses you have by owning a house.

However, with the house appreciation, in the future, you could still earn money for buying a house even with that loan. Opher Ganel explains it perfectly in his article “Worst Investment Ever? Guru’s Advice on Social Media Is Dangerously Wrong”:

“For a $429k home, assuming 20% down, you’d borrow $343,200. With 7% rate, interest totals $225,307 over a decade. That’s 52.5% of purchase price. But what about the mortgage tax deduction? Assuming a marginal tax rate (federal, state, and local) of 18%, the effective mortgage interest over a decade drops to 43% of purchase price.

To break even over the decade, your home would need to appreciate by 78%. Still sounds like a lot, right? Not when you look in annual terms.Annually, it’s 5.9%, slightly higher than the 5.24% average annual appreciation of US residential real estate.

After a decade, you’d expect to sell for $715k. Since you’d have paid a total of $763k by then, you’d be down $48k. But you will still have to pay rent. and owning for 10 years saves you $246k in rent (assuming you rent for $2052 monthly) Add $24k for a decade of renter’s insurance, and that’s $270k saved.”

By making calculations on the long term instead of what you are paying now, you could realize that a 7% mortgage is not a bad deal when you are an investor for two main reasons:

  • First, if renting is paying for the loan, you should not be worrying about how much you are paying monthly because it will be paying for itself.
  • Second, even if it’s for your primary house, you will still make a profit because you will not be paying rent, and the house appreciation covers almost all the money you are paying for interest.

In addition, the interest will not stay like this forever. It is possible to apply for a reduction in the loan rate later if the interest rates are regulated, but what you cannot regulate is the price of a house later when you feel ready to buy.

As everybody is renting, you will have a cash flow fast.

Five years as an entrepreneur, a creator of successful and failed businesses, and a freelancing career have taught me to have a business analysis mindset in everything I do.

So when everyone is doing something because that way they will “save money,” instead of doing the same thing to also save, the best thing to do is to look for a good way to make money with it because there is a demand.

So if everybody is renting because house prices are “crazy,” instead of also renting because “it is cheaper,” the best thing you can do for yourself is to find a way to be the renter because you know many people need it.

If everyone is renting, the best thing you can do is be a renter. And if everyone starts buying, then be a seller.

Don’t look for ways to save money with the little in your life; look for a way to make money with the savings of others so you don’t have to be cheaper.

Most people who say renting is better than buying have never owned a house.

I can tell you that having a YouTube channel is difficult because I tried and failed for many reasons. I can tell you that having a sports car is expensive because I have one. And I can tell you that being a programmer is a good idea because I have an idea of the current market.

However, most people who say renting is better have never owned a house.

They always say that the market is always very high, and they are waiting for it to go down. However, whenever they have an opportunity to buy a house, they continue to compare it with the current rents and never take that step.

Also, anyone who says now is not a good time to buy a house has been saying that same phrase for at least the last 10 years. But if they had bought a house ten years ago, they would probably have doubled or tripled their current money.

So, why listen to someone who says that “real estate is not a good business” if they have never been real estate owners? They have no real experience. They just talk based on their fears and beliefs, not wisdom or facts.

I know that right now, there are good opportunities because I have 5 years of experience and four houses. So if you are planning to buy, the best thing you can do is get advice from professional people, not opinions based on feelings from people who never owned anything.

Final thoughts

I will continue buying houses despite“the current market condition” because it is worth it for investors in the long term.

There is no indication that prices will drop anytime soon, and it is possible that these current prices will be the best prices between now and the next five years.

Median Sales price of Houses — by FredPhoto byFred

As an investor, I know that even if I have the money to wait for a price to drop, there is no guarantee that I would take the best price in the market because recessions are only visible when it is already too late for it to take advantage of the prices.

Also, I will keep saving money to buy more houses, so even if the prices drop later, I will still take advantage of future prices, but with an ongoing passive income.

A rate of 7% does not scare me because, as a business creator, I know that if, despite having a high loan, I can make a profit and pay for that loan without using my money, then it is a good deal.

Finally, a business mindset has helped me see what others are not seeing: rents are in demand. This means that when other people see an issue and a way to save money, I see an advantage to make more money.

Don’t blindly believe financial gurus who tell you not to buy a house now because it is not a good time. Many of them have not considered the last 20 years “a good time” to buy. These people will rent their whole life because they will keep waiting for “the perfect time” forever. But you can’t expect to have a 2008 house price in 2023.

Real estate is the only market I’ve never lost money in, no matter what conditions the world has been in, so I’m sure it will continue to be a good business for the next years.

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Turning ideas into reality. Programmer by profession, Writer by passion. Writing, productivity, and self-development advice.

Yonkers, NY

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