It's no secret that rents, especially in the Madison area, are skyrocketing. The post-pandemic environment that created rapid inflation causing interest rates on loans of all kinds to rise, caused the same rise in rental rates. The average rent for a 2-Bedroom apartment in Madison in 2023 is $1,378/month, up almost 10% from only 1 year ago. The Madison rental market is now more expensive than 93% of other markets.
Anecdotally, almost all of the clients who reached out to buy this year that were previously renting were doing so because their rents increased - by as much as $200 or more per month than the prior year.
When people ask, "Is now a good time to buy?," the answer is "If you're currently renting, yes. 100%." Getting into the market as soon as you can and as early as possible in your earning years, similar to the principle of growing wealth in the stock market, is always better than waiting.
Waiting to save more for a down payment? Unless you can save a significantly higher down payment in a short amount of time, average appreciation could wipe out any chance of a gain on the price or type of home you want to buy, without even factoring interest rate differences, which are unpredictable.
Waiting for the "right" time? When the market is down? When prices drop? In the Madison / Dane County real estate market, you'll have to wait a very long time for that to happen. Builders and developers cannot keep up with the rapid demand for housing in our market. We are not nearly at pace to keep up with population growth, and this coupled with homeowners aging in place and building costs rising above an affordable price point is keeping the supply of homes for sale at record lows. On top of that, more tech and health care companies are setting up in Madison providing more high-paying jobs and Madison's continual reputation as one of the best places to live is attracting more people to the area, putting further pressure (and demand) on our housing supply.
Waiting for interest rates to "come back down?" When will that happen? Lenders and the media can't predict when rates will decrease from the current 6-7%. Most don't believe we'll ever see rates in the 2-3% range again. But importantly, if rates do drop below 6%, the market will explode again with a surplus of buyers, inflating home prices and costing buyers not only more money, but the opportunity to have many buyer protections like inspections, appraisals and financing.
There are several reasons not to wait for rates to come down:
1) You can always refinance. Meanwhile you're locking in the home you want at current pricing, rather than waiting for the market to further appreciate.
2) Lenders are so desperate for business right now that they are offering amazing incentives like unlimited free refinancing, rate float downs, closing cost credits, and even grant money for your down payment that you never have to pay back (this is on top of any government or community grant programs). If rates drop and lenders are busy with refi's again, these incentives will likely dissipate.
3) Costs are increasing and home prices are going up. Waiting only moves the dial up, and the same home selling for $300,000 this year will likely be $350,000 next year.
4) Summer, Fall and Winter are great times to be in the market. The Spring flurry of activity has ended, the peak of the market has passed, so negotiation is more likely, and fewer buyers are out competing. Prices will settle after the early 2023 competition, and buyers can win with more easily including contingencies and negotiating price. This is the last time that you would want to "take a break" from the market or "wait until next year."
All of this to say that between now and the end of the year is a great time to enter the market and buy a home. From the news and hearsay, you would think the opposite of that, but we are here to tell you that in our local market, that isn't true. I especially want to help families and individuals to stop renting and buy their first home. I have seen my clients gain so much equity over the past few years and grow their personal wealth with the appreciation their homes have gained.
On the flip side, I've also seen the buying power of renters decrease year after year until they can no longer afford to buy anywhere in Dane County. Do you have a friend or family member that is renting right now? Now is the time to tell them, "Hey, you need to talk to my Realtor. It's a great time to buy, and she will help you make it happen."Posted by Solveig Schroerlucke on