Hey, Kyle here with WintheHouseYouLove.com.
I just bought a house in one of the worst housing markets that we've seen
in the past few years. And frankly, I'm not worried at all because I
followed a three-step plan to make sure I'm ready to buy in any market
and ride the wave of this volatile
housing market. And really you should be able to feel that way too
because it is exhausting to feel like you have to be some sort of savvy
investor to be able to buy home.
Because ultimately buying a home isn't primarily about making money.
But don't forget when to make money
when buying a home.
You have to be able to sell the home or rent it out.
If you're living in the home, you don't get to see the financial
benefit of that unless your mortgage payment is lower than your monthly
rental payment that you did have.
So, because of that buying your primary home is primarily about the lifestyle
change and not investing choices.
Can you make money when you sell your home?
Absolutely.
That's a possibility.
And use that money to purchase a bigger home or save more money, or, you know, put
it into debt or whatever you want to do.
But you're not going to make this big, massive amount of money just by
purchasing a home, by doing it right. Even if you time the market all the
way to the bottom and you bought.
You don't get to see the benefit of that financially unless you
sell the home or you rent it out.
And look, I know how scary it is to purchase a home when it seems like
so much is working against you.
Again, I bought just a couple months ago. You know, with home prices being unknown
in the future, and interest rates that keep making payments higher and higher.
What I wanna do is I wanna show you why I'm not worried.
Three steps that I followed.
So you don't have to be fearful stepping into the market and you
can be confident that you'll be okay no matter which decision you
make and what the market is doing.
And it'll help you be more comfortable moving forward with saying, I either
want to wait out this market, or I wanna move forward and purchase a home.
Okay, so first of all, it's helpful to note that I'm a mortgage advisor.
I'm licensed in all 50 states, and I have a team that can work
with you if you'd like help.
But I'm following my own advice, okay?
I'm not just sitting here telling you should buy a home because
I'm in the industry of that.
I'm telling you this because this is what I did.
I just purchased a home a couple months ago, and I want to help you see my thought
process of why I was comfortable buying a home, even amongst all the like fire
thumbnails that you're seeing on YouTube.
So, what's been happening is, first of all, home prices have increased a ton.
We've been seeing home appreciation hovering around 10 to 15% per year
over the past couple years, and a lot of people have then raised fears about
home values coming down in the future.
Ultimately, nobody knows what will happen in the future, but
that's a valid concern to have.
And then interest rates are double what they were just a couple years ago,
which obviously increases your monthly payment, making homes more and more
unaffordable as home prices increase and the interest rate increases as well.
So here's why I still buy.
Number one is just to get out of renting.
I was renting and the place that I had was nice, but I wanted something
that was a little bit bigger.
I wanted a really a lifestyle change with where I was living.
So if we're looking into the future over the next 10 years. The cost
of renting for me, I was paying about $900 a month in rent, which
is pretty average in where I live.
I would've been paying over the next 10 years, $123,810.
Now, obviously probably wouldn't have been renting for the next 10 years.
This is just to illustrate the cost difference here.
So it would've cost me this much money.
Then over 10 years compared to buying a home.
It would only cost me $54,000 to own a home, and that's in the loan costs.
Things like closing costs, taxes, homeowner's insurance,
and all of that here.
So you can see it's a lot cheaper to own that home compared to renting and
the way that I found all this math is I have a calculator that I built.
You can just go to WintheHouseYouLove.com/advisor.
You can compare loans, compare renting situations, and it
helps you take a look at that.
Okay, so primarily was to get out of renting.
I wanted to be able to own a home and to gain appreciation
and amortization on that home.
Also, I made a huge lifestyle improvement in a home that I enjoy.
I wanted space, well, just more space than I had cuz I was in a very tiny apartment.
I wanted more space.
I wanted to be able to bring my office to my house, which is where it is now.
I also wanted to be able to have more space to like entertain friends and
have my family over where I really couldn't do that in my apartment.
So you can see primarily buying a home for me was more about the lifestyle
change of owning a home, being comfortable that I can do whatever I want with
it compared to being in an apartment.
It just so happens that the math also follows suit where owning
a home is more beneficial.
in my situation. Also, what's really interesting about buying
over renting is that you gain appreciation and amortization,
which I'll explain in just a second.
So, I rented over the past two years at just one spot, and in
that time I paid $21,600 Okay.
Through just rent cost.
I will never get that money back.
I'll never see the benefit of that money which is okay, like renting is
not this terrible thing absolutely because it helped me do two main things.
And this likely, you know, your renting might help you do a lot of really great
things to set you up in the future.
Not only can it help you do things like maybe you're saving money for a down
payment, maybe you're working up to get higher income with a different job.
Maybe you just need some time and you're not ready to buy right now.
Maybe you're working on credit.
That's perfectly fine.
Renting is not bad at all.
This is just what happened in my situation.
Primarily for me, the two biggest benefits of spending these past two
years renting was one is I needed time to explore different neighborhoods.
Real estate is not a national thing, and it's not just really a city thing.
There's all these little neighborhoods in your city that are gonna change
both in price and also it's going to, they're gonna be different in terms
of if you actually wanna live in those pockets of that neighborhood.
So for instance, in my city, there's probably eight different
pockets of neighborhoods.
Some of them great, some of them not so great.
There's definitely ones I don't wanna live in, and there's ones I do wanna live in.
But it wasn't until I lived in the city and rented that I was able
to actually see, oh, these are the neighborhoods I like to be in because
it's close to the things I want to do.
These are the neighborhoods I don't want to live in because maybe the
home values don't appreciate as much.
Then I would like to.
Also for me, I needed to work on income for a loan approval.
Okay?
So this might be your situation.
Maybe you're not ready or not able to be qualified for a loan right now.
Maybe because of your income or how much money you have or
because of your credit situation.
Renting allows you, still a space to be able to live while you work on those
things to move forward to buy a home.
Okay?
And personally, I needed a little bit longer of time on the job to
be able to qualify for a loan.
So buying gives you two primary benefits.
It's appreciation and amortization.
Appreciation is when the home, your home value increases over time.
The 50-year average of appreciation in the US excluding the past two
years of insane appreciation has been 4% that means year over year, the
average home increases 4% in value.
Okay?
So a $200,000 home turns into a $208,000 home the year after, and then
4% on top of that, 4% on top of that.
That's what home values have been doing historically over the past 50
years with amortization, what ends up happening is a portion of your mortgage.
Actually pays down the loan.
So you do pay quite a bit in interest, but when you rent a home, none of that gets
to go back into your pocket, so to say.
But when you buy a home what ends up happening is part of that money that you
pay in your mortgage goes to the equity of your home, meaning that if you sell it
in the future, you get that money back.
Obviously you pay interest on that as well.
So I believe when you're looking to buy a house, the more calm you
have, the better decisions you're going to make moving forward.
That's why you're watching videos just like this.
Okay, so it's easy to get caught up in the negative news about buying a house.
Like why do you think so many thumbnails are filled with pictures of fire?
Primarily because it gets clicks, because it really brings up a lot
of emotions in people and they want to know what's going on.
And don't get me wrong, this is a really tough market to buy in.
And it's valid when people have concerns about home values, you
know, increasing now and then potentially going down in the future.
And also how much home unaffordability has picked up as well.
And if you're not.
Ready to buy right now.
You absolutely should not buy a house in this market.
But it's so easy to get wrapped up in feeling like there's one absolutely
right decision that you have to make.
And if you don't make it, all of a sudden you're doomed to financial ruin.
And that's just absolutely not true.
Our brains work like this for some reason outta this way to try to protect
us, but it really just creates a ton of anxiety and makes us feel unsure.
And there's not one correct decision that you can make in this
moment, if it feels right based on your research to wait, then wait.
If it feels right to move forward based on your research, then move forward.
Trust your gut after you do your own research and remind yourself that
nobody knows what's going to happen in the future as much as people wanna
try to predict it and show you charts.
Nobody knows what's going to happen.
And since no one knows the future, it's impossible for there to be one right
answer for you in this specific moment.
So then that leads us to home prices and home price worries that you may have about
buying a home, because a lot of people are talking about, what if you buy a home
and then all of a sudden the value drops?
Well, really that's not an issue unless you're looking to sell your home.
It's the same thing with stocks.
Okay?
If you bought a stock right now in a company and the value.
It's not an issue unless you sell.
You don't lose the money until you sell.
If you keep holding and the value of the stock goes back
up, you didn't lose any money.
Okay?
I'm not afraid of home values declining.
Okay?
If there is this big home crash that happens, I'm not going to
lose sleep over it because I'm not selling anytime soon and I'm
comfortable with my mortgage payment.
So I'm gonna show you, I'll show you the steps I've taken with what
I feel like makes me confident in buying a house here in just a minute.
So, I'm not afraid home price is declining, and in fact, my home
value based on comparable homes in my neighborhood since I bought three
months ago has already gone up 3.3%.
This is the appreciation.
That I was talking about.
Now, obviously this is a very short time horizon but it's really interesting to see
because I put 10% down on the home that I live in, and so that's a 33% cash on cash
return already in just a couple months.
Alright?
Also, national averages do not always apply to your market.
When we hear talk about real estate, primarily what we're hearing is a
lot of national data all squeezed together like this blanket that's
supposed to apply to everybody.
That's not the case because there are huge markets like you have Nashville and San
Francisco and all of these big markets that are having lots of fluctuation.
They have lots of growth and then also some contraction as well.
Well, that just doesn't apply to a lot of people in the US but you're getting advice
about these huge markets and assuming that they apply it to these smaller.
and real estate is so hyper specific on local markets, and that's why
I think you need to understand the pockets in your neighborhood.
I'm not worried about what San Francisco is doing because I
don't live in San Francisco.
The market that I live in is completely different than that market.
And so I'm not worried if home values are decreasing in San Francisco
because I know where I live.
They're not decreasing, and I know the pocket neighborhood that I
live in is growing a ton and our city is putting multiple millions
of dollars into this neighborhood.
That's what I'm more worried about than what's happening in some other city with
a market that doesn't impact me at all.
Okay?
You cannot time the market.
I made this video that'll link here at the end called How to Survive 5% Interest Rates.
No matter what happens since then, interest rates have gone up to close
to 7% and they come back down to 6.5%.
But in here, I show you a couple of charts if you bought at the peak of where home
values were and then we saw that decline, the longest time it took for you to
break even on your money was six years.
Meaning that if you stayed in your home for longer than six years,
you would not have lost any money.
Okay?
Sometimes there's this fear that home values are gonna decrease and
you're gonna lose tons of money.
It only happens if you sell at that lower timeframe, if you hold onto it for longer.
History has shown us that the prices do go up.
Okay, so here are the three rules that I follow.
I would suggest that you follow them, but ultimately trust your gut, trust your
instincts, and your own research as well.
First, what I do is I get really clear on why I'm buying a.
For me, I wanted more space.
I wanted more freedom, and I wanted the financial benefits
that came with owning a home.
Okay.
For you, it may be different, maybe your family is growing and you need more space.
Maybe you're downsizing other people they're looking to buy as an investment.
None of these rules are going to apply for those people.
If you're looking at buying a primary residence, a place that you're
going to live in, this is what's likely going to work best for you.
Okay, so for me, rule number one is it must be a comfortable payment, okay?
I cannot buy a house for me personally.
I will not buy a house that makes me feel stretched then, and that's gonna
be tough for me to afford that payment.
Okay, there's tons of different rules on what you could afford.
30% of your net income is a good rule thumb.
Of course, some people are comfortable going higher, some
people want it to be a lot lower.
It's ultimately gonna depend on what you want.
I do have a calculator called the Max Purchase Price Calculator.
The link is in the description.
You can also go to WintheHouseYouLove.com/maxprice.
And in here it walks you through an affordability dashboard.
So you can enter your down payment, your income, any debts that you have.
So in it, it will show you a whole affordability dashboard that will
show you an estimated purchase price, monthly payment, walk you through
different payment levels, and then also show you estimates on things
like utilities and maintenance costs as well, if you're interested.
Also.
My role is I have to plan to live there for at least five years.
This is going to help me kind of weather those downturns if they happen.
If you're looking to sell within three years, buying a home probably
isn't for you at the moment because it exposes you to a little bit more risk.
Also, my role thumb is I need to have at least three months of reserves.
What reserves are, it's your monthly expenses, kind of your survival number.
What do you need to, what does, what does it require each month for
you to be able to pay all of your.
Your future mortgage payment your electricity, gas, groceries, any money
that you spend eating out everything that it costs for you to survive.
You need to have at least three months of that in your bank account
after you pay the down payment and closing costs for a home.
Okay?
Six months is even better, but this gives you a nice buffer
in case something does happen.
You don't have to draw on like credit cards to make that payment.
And then finally write down a list of questions that you have.
Take all of the worries that you have up here, all the questions that you
have about how it works, write it down on paper, and then after that
I want you to reach out to us, talk to a mortgage advisor on our team.
We'd love to know your story and figure out how we can help you
move forward with this decision if it's something you wanna do.
Because what we wanna do is make sure that you get a pre-approval so you're
confident to be able to purchase a home and, you know, shop for homes
and then be able to write an offer.
And then also we wanna show you all of your numbers upfront.
Show you the loan options.
You qualify for the max purchase price.
You can put an offer in for your interest rate, your monthly payment
with all estimates like taxes and insurance, all of your closing costs.
We wanna make sure it's transparent upfront so you
feel confident moving forward.
Okay?
So if you wanna learn more about can you survive a market crash, you
can watch this video right here.