A new year means many things. Crowded gyms, ambitious resolutions, and in Seattle, rain. But it also presents fresh opportunities to build, learn, and grow. At CoBuy, we are optimistic about the year ahead and excited to make homeownership more accessible and equitable for everyone.
The idea that anyone can really own land is ironic. In the best case, we are stewards of the land. Philosophy aside, we all have to live somewhere and most of us have to pay for the pleasure. Combine the opportunity to build equity in a real asset (with institutionally-supported leverage) with a place to stay, and you’ve got a fairly compelling value proposition.
Buying a home is a big decision. Buying and owning together is complicated stuff. We started our company to help folks buy and own homes together intelligently, and that all starts with information. We believe that better information enables better decision-making. Every month, we share insights and perspectives designed to inform. We hope you find it useful, and wish you a healthy, happy 2019.
The U.S. economy has been on a roll for nearly 10 years. This stretch of stellar economic performance is unlikely to roar ahead indefinitely, but here’s a quick snapshot as we kick off 2019.
Geopolitics, global trade, fiscal policy, and monetary policy remain the wild cards in the deck - as always. But it is fair to say that on the whole, things are going pretty darn well. Last month we noted that many economists expect the pace of U.S. economic growth to temper but “remain strong”. Despite the flurry of ominous headlines over the past couple months, many big institutional investors agree. Barring a shock or force majeure, few credible market observers expect that a downturn is imminent.
There is some good news for homebuyers, however. After breaking through 5.00 percent in November, the average rate on a 30-year fixed-rate mortgage has dropped to 4.51 percent. This retracement owes largely to investor flight to quality following volatility in equity markets and lingering concerns about the government shutdown.
For a homebuyer borrowing $400k to buy a new home, a 50 basis point reduction on a 30-year fixed-rate mortgage means $43,420 less in loan repayments over the full term.
But what's it all mean, Basil?
The local population is growing, the local economy is adding jobs, houses are expensive, rents are expensive, building up is tough, building out isn't feasible, and the Fed looks set to approach monetary policy in a prudent manner.
There is little reason to doubt that we'll see demand for homes across Greater Seattle, particularly after the market has taken a breather. Buyers who decided to wait it out on the sidelines at the end of 2018 will be joined by newcomers to the market. No doubt, those who do decide to enter the fray will be encouraged by lower borrowing costs and and more supportive market dynamics.
In the example below, we assume:
Economies of Scale
Breaking it down...
On a per-bedroom basis, a three-bedroom home in Seattle is currently 46% cheaper than a one-bedroom home in Seattle. Economies of scale are real! Co-buying can mean more bang for your buck and provide greater optionality.
Context is key
Considering co-buying a home? Here are a few things to take into consideration.
It's a good idea to get clarity around your circumstances and those of your co-buyer(s). This will help in the decision-making process and also ensure that there is alignment between the parties involved. If you do decide to proceed, it will make the purchase process smoother and contribute towards the likelihood of a successful co-ownership arrangement.