Buying A House In San Jose, CA: 2001 VS. 2022
Are you thinking about whether you should buy a house and wondering if now is the best time? Making a home purchase in the San Jose area is a huge financial investment, so make sure you do your research first!
Did you know that if you bought a home in San Jose just one year ago, there is some very interesting data to share! Stay tuned for these details that will blow your mind!
SAN JOSE MARKET OVER TIME
Here’s a screenshot of San Jose’s real estate market from 2012 through September 2021. As you can see, prices (denotated by these orange and blue lines) ebb and flow. When you’re buying a home is important but timing the market is pretty much impossible. Plus there is something even more important to consider with your home purchase.
First, plan to buy the right size home that can meet your needs for five to ten years. One major point of buying a home is to settle, establish a place to call home, become part of a community and not have to move often. You’re not likely to buy a house and sell it in one to two years. With this amount of time, you can weather the ebbs and flows of the market.
So to review these ebbs and flows, let’s talk about the market today versus the past years. Notice the yellow line of inventory on the chart below. In 2020 and 2021 inventory has been extremely low. The green bars are the number of sales so how can the homes available be lower than the sales? Simply put, the homes are selling so fast that they just don’t sit on the inventory “shelves”. Homes are for sale for 1-2 weeks and then in the contract. As you can see for San Jose, this is an inventory (yellow line) lower than sales (green bars) is not normal from a historical perspective. Normally, inventory is more than sales expect part of 2017 and 2018. 2020 and 2021 are really special and unique market times.
TIMING YOUR PURCHASE
What if you were to buy at the price peak in May 2018? If you stayed just three years in your home, the market would have already recovered, and you would’ve made a pretty amazing profit of $219,410 in market appreciation (phenomenal!). So based on my recommendation to plan to buy a home that will work for you for five to ten years you will weather the ebbs and flows of market prices. So do you see it’s not about when you buy, but when you sell?!
WHY SAN JOSE’S MARKET TODAY IS NOT “NORMAL MARKET”
Today’s market is especially unique for yet another reason other than strong sales and low inventory. Interest rates are at historical lows. Do you know the power of interest rates on your overall affordability and investment?
One highly impactful reason to get into the market now is to take advantage of these low-interest rates. Paying less interest is obviously better, but did you know that these low-interest rates also enable you to gain equity much faster?
Watch the full video on YouTube Buying a Home in San Jose California | Should You Still Do It? to hear the explanation about affordability over time.
WHAT YOU NEED TO KNOW ABOUT TIMING THE MARKET
Let’s talk more about the timing of when you sell not when you buy.
What if you bought a home in October 2001 and you stayed there 10 years? There was a huge increase in prices the first few years especially from 2004 to 2007, then a big historical price drop in mid-2007 and 2008. 10 years in (2011), the market recovered some and there would have been a tiny profit in the market value of about $37,000. But also you had a $65,000 equity gain by paying down your mortgage with your monthly payments at around 6.75%.
If you sold in 2007, there would have been much more equity gain. Be say you were not ready to move so instead stayed 12 years in that property. You would have gained $229,000 worth of market value and additional mortgage payment equity gain for a total of $322,000.
Do you see the power of when you sell the home? It’s not about when you buy, but it’s about when you sell.
Now, let’s discuss if you bought a home one year ago in September 2020. The average price in San Jose was $1.340 million. The average price in September 2021 (one year later) changed to $1.507 million. That’s a total of $166,000 worth of equity gained from market appreciation. Today’s interest rates are much lower than in 2001. Today’s rates are near 3% which adds extra value as well. In just one year at these lower rates, $25,000 of principle would have been paid off in your monthly mortgage payments. In just one year in today’s unique market and $191,000 worth of equity would be in your pocket!
Do you see the power of today’s interest rates and the strong seller’s market? Is now a good time to buy in San Jose? The answer is YES for several reasons.
IS NOW A GOOD TIME TO BUY?
First, high demand and low supply are showing that this market is out of balance and it’s going to be healthy appreciation for a while. Expect about 5% appreciation in 2022. This estimate is much less than we have recently experienced in San Jose Real estate, but with the expected inventory increase, the imbalance will lighten and prices will likely slow their appreciation.
Second, interest rates are excellent. To gain equity, just pay your mortgage payments and put that money in your pocket, not your landlords! These low-interest rates put a larger percentage of your monthly payment toward your principal loan amount. To understand this better watch the video on this topic.
The most important decision is the timing of your sale, not your purchase. So get out there and start home shopping to take advantage of the excellent home buying conditions!
Make sure you stay in tune with the market by watching Theresa Wellman – Realtor, Homeowner Experience monthly market updates on YouTube so you can get a feel for what’s happening in the market. Subscribe to our YouTube channel so you’ll be notified if we see any shifts. Theresa’s analytical expertise helps her speak Silicon Valley’s language; her people-centered approach helps her relieve her clients’ anxieties. So, here’s a little bonus for you, download our Homebuyer’s Guide for FREE!