Will Home Prices Go Down?
Analysts, home shoppers, renters, homeowners are all wondering whether home prices will reduce at the same margin that costs to build go up. There are conflicting answers however. Looking closely at housing demand we see the need increasing, not decreasing. With rent, land and the cost of construction going up, it’s hard to say “no” to owning a home today. When asked if rent will increase over the next 7 years, you will have a hard time finding someone that would say “the cost to rent will be lower”.
In seven years, home prices will not be lower from today. It’s unlikely anyone believes they will. The price adjustments occurring now will be small and mainly for homes that had unrealistic prices to start with… let’s face it, it should never cost $800,000 to live in Boise!
Instead of waiting for home prices to go down, prospective buyers are weighing the pros and cons and taking action now. Many sellers are offering attractive financing packages to create a more affordable payment. The rule is: If you can afford the payment on a 7-to-10-year fixed loan, fix your payment now and take advantage of the tax deductions that you won’t get with renting. Statistically, most homeowners move every 13 years according to the National Association of Realtors.
Take a look at the recent data from the Mortgage Bankers Association (MBA), which proves all of the above to be correct.
Tax Breaks for Homebuyers
High demand for rentals continues to drive rent prices up with zero deduction to the tenant, while building wealth for the property owner. It is no secret that one of the cornerstones of building wealth is investing in real estate. Anyone looking for tax breaks should consider buying a home instead of renting.
Homeowners can take advantage of several tax deductions including:
- Mortgage Interest Deduction
Homeowners can deduct interest paid on a loan related to building, purchasing, or improving their primary home up to $750,000.
- Mortgage Points Deduction
Homebuyers pay “points” to their lender when they take out a mortgage. These points are a form of prepaid interest paid up-front in exchange for a lower interest rate. In most instances, mortgage points are fully deductible the year they’re paid.
- State and Local Taxes (SALT) Deduction
The SALT deduction allows property owners to deduct payments made for property taxes and income or sales tax payments up to $10,000.
For renters, the choice to buy often comes down to affordability. Average rent for a vacant unit in Orange County jumped to $2,570 per month in 2022, up 18.5% from the spring of 2021. Most Southern California renters are already paying more than they would for a 30-year mortgage. This makes a 7-to-10-year fixed mortgage a feasible option for many renters.
Strategic Sales and Marketing offers a variety of real estate sales and marketing services. Our team has years of experience working with the real estate industry and understands the steps required to identify and connect with potential buyers. Please contact us for more information about our services.