I have put off writing this article for several weeks because I am genuinely devoted to give the best advice I can to my clients. Every buyer I am working with now and almost every buyer who has come through one of my open houses the last several months has asked me if now is the right time to buy and what I think will happen to home values.
There is a lot of information out there about low prices, low rates and tax credits and how people should take advantage of these things. So, let me answer the question of whether it is a good time to buy. Well, not so fast. I wish there was a clear cut answer that was right for everyone. Frankly, there is no blanket answer that applies to all. For many people, now is a fantastic time to buy. Let’s look at what you should consider before you decide if buying now is right for you.
Are prices still falling drastically in your market? Are there a ton of foreclosures in the neighborhoods you are looking to buy in?
If the answer is yes, maybe you should wait. A lot of new foreclosures being filed in an area usually signal that the worst is not over yet and it usually means that prices are going to continue dropping substantially. To find out foreclosure rates in your area, go to
http://www.realtytrac.com/foreclosure/foreclosure-rates.html . Certain parts of California and Nevada have been hard hit and there seems to be no end in sight to prices dropping and foreclosures being filed. If you are thinking about buying in one of these markets, you may want to wait. But talk to your local real estate professional to find out about the unique forces in your area.
Are you looking to “move up”?
“Moving up” means selling a less expensive home and buying a higher priced home. It is true that selling a home is more difficult now then it used to be and you will ‘take a hit’ on the sale. But don’t let that scare you. Just be smart about it. Don’t commit to a new home until you have sold your current home. Then, move to a nicer, bigger home at a terrific, discounted price.
Take a look at rates right now. Rates are almost unbelievably low right now.
Why are they so low? It’s one of the things our government has done to encourage homebuyers to enter the market and allow homeowners with adjustable mortgages to refinance at a lower rate. I don’t necessarily agree that this is the best tool or bail out strategy but that’s a topic for another blog entry.
If prices go down more, higher rates can affect your payment sufficiently as to wipe out any or all of that additional buying power. For more information about how a rise in rates can make buying a home less affordable please read my blog entry entitled http://brooksheinzerealestate.blogspot.com/2008/10/know-how-interest-rates-affect-your.html
More points to consider. Do you want to own a home?
Has it always been your dream to own a home? Do you have a stable job (like Health Care, certain government jobs, etc.), are you worried about inflation (you should be it’s a real thing), do you like to get free money from the government (you get a tax credit from the government when you buy a home now)? Well, then, maybe you should buy a home in 2009.
Obviously, if you are not comfortable with the security of your job, you may want to consider holding off on buying a home. On the other hand, you will have a housing expense whether you are renting or own so you may just want to make sure that you are not overextending yourself and buy a home you can truly afford.
Historically, real estate tends to rise along with prices in the overall economy and can thus provide an effective hedge against inflation. Of course, at the moment home values are dropping not rising. Have you noticed that many other goods are cheaper too now? Have you looked at gas prices, air line tickets, hotel rates, etc.? All are down – seems food is the only commodity that hasn’t dropped. The government is creating money out of thin air by printing more of it. Sooner or later that will result in inflation.
If you haven’t guessed it, I am not sure that some of the things the government is doing to ‘help’ us make a lot of sense, on the other hand, I would not talk a first-time homebuyer out of taking free money. If you plan on buying a home, take advantage of the tax credit the government is offering.
Appreciation is great and it is the one benefit that most homeowners understand. Now that we have depreciation in action, most homeowners forget that there are other advantages to owning a home. Remember that your home is your shelter, it is where you live, where you raise your children and where you create family memories. You have to live somewhere, right? Why not in your home where you can do as you please? Rather than an apartment where someone else dictates the rules. Payments on your home (unless you have one of those dreaded adjustable rate mortgages) are generally fixed. Rents can go up.
Don’t forget about the tax advantages of owning a home – mortgage interest is deductible and reduces your taxable income. I am not a tax advisor, so check with your CPA how your situation is affected by this.
To get back to my initial reason for writing this entry: Should you buy a home now?
Depending on your situation and your goals, now is a great time to buy a home. Whatever happens with the economy, you need to live somewhere and an affordable place is always a good thing.
Work with a real estate agent who truly understands his/her market and cares about you. Work with a mortgage professional who explains all the costs involved in financing a home and who will go over your budget in detail. Buy a home that is affordable to you, don’t overextend yourself. Plan to stay put for a while and enjoy the home you bought for many years to come.
For more information, please contact the Brooks & Heinze Team in Seattle, WA or attend one of their free homebuyer workshops – http://www.propertyinseattle.com/buyerworkshop.htm
Kerstin G. Brooks
Brooks & Heinze Team
“Where People Come First”
Web: www.propertyinseattle.com
Email: info@propertyinseattle.com
Kerstin G. Brooks, Broker 