Is Now the Right Time to Buy a House?

The roller coaster ride that was the real estate market in the United States for the past year continues unabated in spite of federal efforts to bring some stability to the markets. Foreclosures across the country continue to rise and housing prices continue to fall. Mortgage rates are at historic lows, and that, coupled with low prices, is enticing many house seekers to consider dipping a toe back in the water.

Homemortgage1

But is now a good time to buy a first home or to upgrade from your existing one? The answer is “it depends”. It may be a very long time before real estate once again becomes a solid investment strategy. The days of steady housing price increases we have seen over the last decade may even be over forever.

It’s important to separate out your investment goals from your need for shelter. The latter you will need no matter what form it takes: a house, an apartment or even a tent in the woods. Evaluating whether buying a house meets your need for shelter is a simple task of comparing it to the alternatives. How does the monthly mortgage payment compare to rental payments you would have to make on a leased property? What happens to rates when you have to renew the mortgage? What is the condition of the house (i.e. could it result in thousands of dollars in repairs)? What other expenses would you incur that you wouldn’t have to with renting?  

Deciding whether buying a house now makes sense from an investment perspective is a very different value proposition. If the house would be your largest investment, the current market makes it a potentially risky investment right now, especially if you need the money for retirement or other purposes in the next ten years. While most experts agree that the housing market will turn around in the future, there is no universal agreement on when that will happen. It may be next month, next year or not until 2030. If your investment time horizon is long enough, the combination of low mortgage rates and low housing prices may make the investment attractive, but, as always, consult your independent investment advisor before making such a large investment decision.

So, is now the right time to buy a house? The answer to that will be as individual as each person’s financial goals. It is, however, a perfect time to re-evaluate those goals and to determine if buying a new house fits.

Popularity: 38% [?]

More on this topic (What's this?)
Ivy Zelman: “Home prices are going back down” (naked capitalism, 11/20/09)
CHART OF THE DAY: ARE HOME PRICES FALLING AGAIN? (THE PRAGMATIC CAPITALIST, 2/24/10)
The Worst Is Not Over (Financial Armageddon, 1/2/10)
Read more on U.S. Housing Market at Wikinvest

If you enjoyed this post, make sure you subscribe to my RSS feed!

This entry was posted on Monday, November 2, 2009 at 3:55 pm and is filed under Investing in Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

« Back to text comment