5 wrong reasons to not buy a home in New York
September 28, 2022 – The stock market is on a roller coaster ride, interest rates are rising, interest rates are soaring, inflation is at its peak… There is reason to hesitate when making what is for most of us the most important financial decision of all. our life. And yet, is it really reasonable to wait?
If you’re looking at New York City, the answer is probably no. “The best time to buy is always today,” says Renaud de Tilly, founder of DE TILLY REAL ESTATE, and a New York real estate specialist for European expatriates. To try to make sense of it all, here are five reasons not to buy that you will hear these days, and why it is probably wiser to ignore them…
1/ Prices will continue to fall
It’s true that prices started to fall in 2022. “We have clearly moved from a ‘seller’s market’ to a ‘buyer’s market’,” says Renaud de Tilly. The main reason: after two years of pandemic that largely “froze” prices, sellers put their properties back on the market after a “pandemic” pause. Thus, at the national level, the number of homes for sale increased by 26% in the first six months of 2022 compared to the previous year.
But that in no way means we’re headed for a sharp drop in prices, at least in New York. “If we take a step back, we see that beyond the micro-variations of a few months, sometimes a year, over the long term the real estate market in New York is steadily rising. And strongly!
2/ Interest rates have increased significantly
It is true that the historically low rates of the last few years are now a memory. But one must beware of the optical effect: going from 3% to 6% interest rates may seem prohibitive, “but one must remember that we are finally back to levels that we have already experienced; the rates are currently those that we knew about twenty years ago”, Renaud de Tilly reminds us. It is also important to keep in mind that, if rates go back down one day, you will always have the possibility of refinancing your real estate loan at a lower rate.
Most importantly, no matter how shocking the home loan may be, the mortgage rate is not and never has been the most important factor when buying. “The most important thing financially when you buy a home is that you start building your wealth,” reminds Loandepot economist Brian Rugg. “By waiting too long for the right rate, you end up paying for someone else’s home loan: the homeowner who rents his or her house to you in the meantime…”
The best way to think about this, summarizes another economist, Danielle Hale of Realtor.com, is to consider that by borrowing to own a home “you are paying rent to yourself.” Because “by taking out a home loan with a fixed rate – at least for a while – you are protecting yourself against future inflation”.
3/ Buying is now more expensive than renting
Regularly, the press publishes reports showing that buying is more expensive than renting. Beware of these reports! First of all, they are monthly (or annual) expense comparisons. They are relevant if you want to know if you can afford to buy (while staying below the famous 40% of income). But these comparisons do not take into account future capital gains or the simple fact that you are building up “forced savings” by paying off a mortgage.
4/ I know that I will not spend my life in New York, probably not more than five years
This is probably the most serious argument in favor of renting and against buying. Below a certain period, buying doesn’t make much sense, especially because of the “closing costs” that will be impossible to recoup at the time of resale. But even if you only plan to stay for three years, it can make sense to buy,” says Renaud de Tilly. This is what the study of long-term price trends in New York shows: you have to be very unlucky, or have been badly/unadvised, not to be able to make enough capital gains in New York in three years to cover the costs of purchase and resale.
5/ In these uncertain times, it is wiser to rent
Nothing is less certain: these uncertainties are causing the rental market to explode, with historically high rents. “And the way leases work in New York, where leases are generally for one year, does not protect tenants at all against a sudden increase in rent,” says Renaud de Tilly. By choosing to rent for security, you risk having to face a very sharp increase in rent in one year, whereas a fixed or fixed and then variable rate mortgage (the most common in the United States) will protect you for at least a few years…
In the end, the real risk, concludes Renaud de Tilly, “is waiting too long for the conditions to be ideal.” Since I started working in real estate, I have never met anyone who, having decided not to buy, did not regret it a few years later. The best time to buy is always now!
Invest in New York with DE TILLY REAL ESTATE
Renaud de Tilly, founder of DE TILLY REAL ESTATE
DE TILLY REAL ESTATE is the number one agency for French speakers in New York and offers its experience to its French, American and international clients. The experts know each neighborhood perfectly, because they live there. The entire DE TILLY REAL ESTATE team is well versed in the French and international markets and culture. They can easily explain the nuances with the New York market. All agents on the French team are bilingual in French and English.
For more information, please visit the agency’s website.