Why Now is a Great Time to Buy Your First Real Estate Property

We are living through a period of tremendous uncertainty, fear, and social upheaval, bombarded with scary headlines, images, and daily death toll reports, stuck at home “indefinitely”, hoping to remain healthy and employed. Face masks, gloves, and social-distancing is our “new normal”. Those of us that do leave the house encounter mostly shuttered storefronts, bars, and cafes. Entire sectors of the economy are at a virtual standstill.

In this environment, what’s a homebuyer or real estate investor to do?

Well, to paraphrase the Oracle of Omaha, Warren Buffet: 

“Be greedy when others are fearful and fearful when others are greedy.”

I think history supports this sage statement. The best buying opportunities have typically been in times of great uncertainty and high volatility. In other words, it often works out well in the long run to buy when everyone else is running scared. The opposite is also true – you may have missed the best buying opportunities if everyone from your neighbors to your kids’ babysitter is talking about how this is a great time to buy – whether it’s “dot.com” stocks in 1999/2000 or homes in 2007/2008.

So, in this post, I want to break down what I believe are the Top 3 reasons why now is a great time to consider making your first (or next) real estate purchase.

Here is a summary:

If you have excellent credit and can lock in a 30-year mortgage at a rate that starts with a “3”, it’s a no-brainer. You’ll lower your monthly overhead and save a lot of money on the total interest paid to the bank over the life of the loan. It might also mean that you could afford to stretch your budget a bit, given the lower monthly mortgage payment (compared to even just a year ago).

Another point I want to make, as it relates to today’s mortgage rates is that it’s important to put them in a historical context. I looked up average historical mortgage rates on 30-year fixed-rate loans and found a chart going back to 1971 provided by Freddie Mac.

he average 30-year rate in the month of March of 2020 was 3.45%, with an average of 0.7 points upfront (simply put, “points” is the dollar amount the lender charges the borrower at closing, as represented by a percentage of the loan amount).

In March of 2019, the average rate was 4.27% with 0.5 points upfront. So just a year ago, the average borrower would have locked in a rate higher by 80 basis points (a basis point is 1/100th of a percent), which as we’ve seen earlier, would make a big difference in terms of both the monthly cashflow and the total interest paid over the life of the loan.

But let us go back even further in time. In March of 2009, for example, (the year following the financial crisis precipitated by the collapse of the subprime housing market), the average 30-year rate was exactly 5%, with 0.7 points upfront.

In March of 2001, meanwhile, after the bursting of the “Dot Com” bubble, 30-year rates were 6.95% with 0.9 points upfront.

The second reason why now may be a great time to buy real estate is that there is simply less competition from other buyers. We are in late April, which would normally be the beginning of the spring buying season, but because of the stay-at-home and social-distancing guidelines in most states and the economic turmoil wreaked by the COVID-19 pandemic, a lot of buyers who would be competing for properties are either on the sidelines or out of the market entirely.

So, if you’re an employed, qualified, and pre-approved buyer, with the funds for a down payment and a relatively secure job, you should enjoy a competitive advantage.

And the 3rd and final reason why this may be a great real estate buying opportunity is that sellers may be extra motivated. Think