BOISE, Idaho — Some homebuyers in our area are losing their homes, thanks to an unpredictable market and some bad advice. That advice, “Date the rate and marry the house.”
William and Ashley Kaiser are local realtors who are raising a red flag for homebuyers. "It's a common saying that gets thrown around by many real estate professionals, 'date the rate marry the house,' and it is incredibly irresponsible," according to Ashley.
The idea is that you buy a home you can barely afford, understanding that the value will go up, while the mortgage rates come down. So, in a couple years, you refinance, cash out some equity, and lower your payment with a lower rate. But Ashley says it's dangerous to bank on future home values and mortgage rates, "Things have to be perfect in order for you to refinance. Your house has to be worth more than you owe. Your debt-to-income ratio has to be the same. Nothing has had to change in your financial situation."
Mortgage rates and home values are unpredictable. Rates were supposed to have dropped to five percent by now, and instead, they're over seven-and-a-half! So, refinancing would only increase your house payment significantly. Also, home values have not gone up, they've gone down by seven to 15 percent. And if you owe more than your house is worth, you cannot refinance. So, Ashley says, people who were hoping to do that, are stuck, "Those are the people that are in trouble right now. We're seeing a few short sales come up in our market, which has not been the case in quite some time."
The Kaisers did some research on those short sales and found one person purchased their house for $100,000 more than they're trying to short sale it for. It looks like they had an adjustable interest rate. Again, rates have spiked, so their payment spiked. And with their home value dropping, they cannot refinance.
"So in turn, they are going to lose their house," Ashely said.
So, where are homebuyers getting this bad advice? William says, it's coming from real estate professionals who are feeling the pinch of a cold housing market, "If they're in a tough position, where they need the business, they're not going to do diligence on your behalf like they should. When your back is against the wall and people are hurting, they might make decisions that are not what they would make in a clear mind."
Which is why Williams says you need to work with people you trust, advocate for yourself, and spend well within your means, "If you're approved for say, $600,000, that doesn't mean you need to buy a house for $600,000. Don't stretch yourself too thin to where you're maxed out and house broke. Invest. Treat it as a long-term investment."
That’s because, even though values are down now in the short term, they're still up in the long term, and will appreciate again at some point. William says, if you're looking for a specific number to buy at, try the median price in the market, "That is where most people are able to purchase and afford and buy. So. if you're purchasing at that price, you're going to protect yourself more-so than purchasing outside of your means. And those homes see less depreciation as well, because those lower prices are in higher demand… And don't try and keep up with the Joneses."
That median price is where you'll see the most equity. Right now it's $535,000 in Ada County and $416,000 in Canyon County. But the most secure equity is “sweat equity.” That’s where you make home improvements yourself, and it only costs you materials and your own sweat.