For most people, purchasing a home is the largest financial decision you will make in your lifetime. That’s why there is a lot of consideration involved when trying to decide when is the right time to buy or build.
The top concerns typically revolve around minimizing two factors: cost and regret.
Francisca Alonso, CEO of AV Architects + Builders, sat down with Nathan Burch, mortgage lender from Vellum Mortgage, to discuss this very topic and provide some valuable insights to help buyers make the best decision for them.
With 23 years of experience in the mortgage industry, Nathan is uniquely positioned to provide valuable counseling and advice to clients trying to determine when is the right time to buy.
In this article we will discuss: supply and demand, rising housing costs, and include a video featuring a case study example to help you better understand what the current climate is and how to move forward.
Understanding Supply and demand in the housing market
There are several factors we have identified to help us understand what is happening with supply and demand in the housing market today.
Across the country, millennials have been delaying home buying, resulting in a backlog of people wanting to own a home. Specifically to the Washington DC area, there is a massive shortage of housing, leading to increased demand and rising prices.
The Northern Virginia area, specifically, is highly populated and only continues to grow. As a result, land is becoming scarcer, further contributing to the shortage of housing and rising prices.
The number of homes available for sales has significantly decreased over the years, creating an inventory problem that will persist for the foreseeable future.
In today’s market, many properties found for clients are off-market, meaning they are not yet visible on platforms like Zillow or Redfin. This approach helps avoid bidding wars and allows clients to buy directly from homeowners.
How do I find a lot to build on?
There are three main ways to find lots: looking for teardowns, connecting with homeowners who want to sell without listing, and working with a realtor.
The Impact of Federal Funds Rates
The federal funds rate is one of the Federal Reserve’s key tools for guiding the cost of money in the U.S. economy. It impacts everything from the annual percentage yields (APYs) to the rate you pay on credit card balances.
Nathan Burch explains the correlation between the federal funds rates and recessions. Nathan explains that lower rates create less competition and make it easier to purchase a house, while higher rates lead to increased competition and higher prices.
When looking at a chart showing the median sales price of homes in the U.S. since 1965, Nathan explains that while there have been fluctuations during recessions, homes generally appreciate in value over the long term.
Should I start building now or wait?
While it feels like now is a complicated time to invest, there are actually many advantages to beginning a new build project today.
Starting a construction project now allows buyers to lock in today’s construction and teardown costs, as prices in Northern Virginia are expected to continue rising.
A new home takes about 18 to 24 months to build from design to completion. With AV Architects + Builders, our clients pay only 10% of the total project cost during the design phase (the first 4-6 months). The remaining 90% of the cost is broken down into 15 draws to be paid throughout the construction of the home at various milestones (12 to 18 months).
This means that you do not need to pay the full cost of the new home all at once and you are not married to today’s rates. While no one can predict for certain what the rates will be in 2 years time, we do know that they have historically only gone up. Therefore, there is nothing to gain from waiting and delaying your dream home.
Cost Analysis Breakdown: Comparing Buying Now vs Waiting
Nathan Burch put together an analysis comparing the cost of buying now vs waiting.
What if we waited for rates to come down? Believe it or not, but that will actually cost you more money.
Watch this video to see the cost comparison breakdown:
To learn more about financing, contact Nathan Burch with Vellum Mortgage.
When it comes to buying or building a new home, there are always tough decisions to make.
Regardless of which option you choose, it is essential to work with a reputable realtor, lender, architect, and builder to help you achieve your dream home goals.
If you are interested in building your own new home, contact us for a free consultation today!
AV Architects + Builders is a custom home builder specializing in modern home design with the philosophy of Vacation Style Living. That is creating a home that makes you feel like you’re on vacation all year round.
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