You read that right. A Realtor telling you not to buy a home. It’s quite a concept isn’t it? Well, there are some very valid reasons not to purchase a home in the next few months, and I wanted to point them out. They are in red.
Buying a home can also be a great idea since we are in a buyers market. Many sellers are desperate to sell, and most buyers are getting everything they need along with most of their wants. You can find the reasons it makes sense to buy in the green.
Reason #1:
If you’re worried about prices dropping, don’t buy a home. A home is a place to live. If you plan on purchasing real estate for an investment, now is probably not a great time to buy a home unless you get a really great deal and you plan on renting it out for cash flow. The data out there says more foreclosures are headed our way, and prices in many markets are still dropping.
Reason #2:
This sale will be on for a while longer. Many people believe we are looking at an “L” recovery. Which means, once we hit bottom, prices are expected to flat line for a while. When will we hit bottom? No one knows, and you can only tell once prices start to go back up. If you can wait it out, you shouldn’t buy.
Reason #3:
You have no money to put down. Buying a home with little to no money down is very risky. If you lose your job and have to move within the next couple of years, you could end up bringing a lot of money to the table. There are many fees associated with selling a home, even if you don’t use a Realtor. If you can’t bring that money to the table, you could face foreclosure, which no one wants.
Reason #4:
You’re not thinking long term. The stats say, the average home owner moves every 7 years. I just don’t think that’s justifiable these days. Don’t buy a home if you plan on sticking around for a couple years. If you have long term plans, like 10 years+, than you might be okay to buy, but don’t quote me on that one.
Reason #5:
The market is to unstable for many people’s tastes. Even if you have money, right now may not be the right time for you. If you’re unsure, stay conservative. If you don’t feel it’s the right time to buy for you, then so be it. Many people are sitting on the fence, and thats okay.
Now let’s look at why it makes sense to purchase a home in 2010.
Reason #1:
Interest rates are at record lows. If you wait out the market, you will miss out on thousands of saved dollars in interest paid. Once inflation hits, which it will with all the money the fed is pumping into the economy, interest rates will soar much the same as it did in the 70′s and 80′s.
Reason #2:
Some markets are actually recovering already. Depending on where you live, you may be in a strong market, and if you can find a descent deal, purchasing could make sense.
Reason #3:
High inventory levels make for lots of choices. Many areas around the country have high inventory levels giving you a lot of choice. If you’ve been waiting for just the right home, it’s possible you can find it in today’s market.
Reason #4:
All in all, homes are becoming more affordable. Low prices and interest rates at all time lows make buying a home more affordable than it has been in many years. If you can find a home such as a foreclosure or short sale to buy below market value, it could be a great time to buy.
Reason #5:
The cost of renting is increasing. With many people unable to afford their own homes, they are forced to rent. The increase in rental demand is causing rents to go up, and it might make more sense for you to purchase a home. Besides, if you are paying rent to someone when you could buy, you could start building up your own equity rather than paying a landlords bills.
All in all, whether you buy or not, the best advice I can give is to be patient. Make sure you have a descent down payment, try to get a good deal, and know your limits. Don’t purchase a home you can’t afford, and don’t buy a home if you don’t plan on sticking around for at least 5 years.
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{ 2 comments… read them below or add one }
I would also like to point out that price is NOT the only consideration, in fact if you’re not paying cash; it should not even be a buyer’s first consideration… Here’s why:
For every 1% an interest rate increases it has the same affect on the monthly payment as a 10% increase in purchase price. And conversely for every 1% an interest rate drops it’s like paying 10% less for the property.
So financing a $200k home today at 4.25% will yield you a lower payment and have a lower total cost over 30 years, than buying the same home next year at $190k with a 5.25% rates.
Rates have never and will never be this low again, don’t lose out on a 4.25% rate because you think the home might be 5% cheaper next year!
Great information Josh!
If you figure the home will only lose a small amount of value over the next year, than yeah it may be the right time to buy.