The long spell of inflated house prices seems to be coming to an end. Mortgage rates are getting lower. Is it the right time to buy a house?!?
A recent NY Times article suggests that it may be a good time. The article mentions that this could be the buying opportunity of a lifetime. The major drawback though is we don’t know when the market will actually hit bottom. It’s possible that prices could fall even further!
On top of dropping prices, mortgage rates are also dropping. Currently in the 5-6% range, rates could fall even further due to government pressure. As the article states it would be “a truly incredible figure to be able to lock in for three decades.”
First time home buyers, the article states, would have a nice advantage in that they wouldn’t have to worry about selling one home to buy another. (I know of someone that is in contract to buy a home but is stuck right now because the person who is supposed to buy their home is having credit issues.)
If you are considering buying a house then now is the time to start working on your credit score. This number will be crucial in getting approved for a loan.
Make sure you can afford the payments in today’s market. If you are counting on getting by with two salaries you may reconsider as unemployment rates have been rising.
As always make sure your financial ducks are all in a row. Lenders are looking for that 20% down payment and they will be more careful in determining if you can really afford the payments.
The biggest thing to consider is why you are buying the house. If you have a long-term outlook and plan on living in the home for a couple of decades then you should be ok if prices were to drop in the short term. If you only plan to live in the home for a few years then you may be in danger of dropping prices.
This article really intrigues my wife and I. We’ve been saving to make sure we can afford a house with as little worry as possible. We just may start looking into homes soon.
What do you think? Is it a good time to buy? Or does the bottom still have further to go?
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Oh, I hear you FFB… last night I even dreamed about it. Of course, that could have something to do with the fact that in the last week we have gone 30 hours without water and then more than 20 hours without heat and hot water in an unrelated incident. Part of the conversations we’ve been having about buying are about how tight things will be at first (although, 1 income in this city… I don’t need to tell you!) but the mortgage payments will be the same for 30 years and salaries will continue to increase – so after a while it will not be so hard. If you and your wife buy, will this change the decision to have her stay home?
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It’s sounding like a good time to buy a house to me. I have a meeting with the bank this afternoon to see what kind of a mortgage package I can qualify for.
In our case we won’t be staying in the house much more that 2yrs hopefully. But by picking up a depressed property and fixing it up I fell confident that we can start out w/ only 3-5% down and in a year build the equity enough that we have 20%+ “down”.
The one problem is that the Wichita, KS housing economy is doing much better than most. So finding a “good” depressed property will be the hardest part probably.
@ JC – What in the world happened?!?
Yeah, no matter how much we’ll save it will be tight but like you say the payments stay the same while my salary should rise. As for my wife working, well we’ll see how that works out. Money-wise it would be easier if she worked but it wouldn’t be as easy emotionally on us. I’d like to see if we could do it on one salary.
@ Justin – Just e careful. Don’t assume that prices will rise in the next few years. There is a chance that you could lose equity in 3 years time.
Here in Vancouver, BC, prices have more than doubled but have recently started going down.
Even though we’re having the Olympics in less than 2-yrs, I still feel that prices may drop a bit more, so I wouldn’t want to buy right now.
Still think it’s way to expensive.
@ TStrump – Location definitely matters in trying to figure out where prices are going.
I don’t think we are at the bottom just yet, but no one can officially predict it. I think if you can afford the house with no worries, it will be a great investment, 5-10 yrs down the road. May be at a loss over a 2 yr period, but after it’ll pay dividends. Real estate is always the best investment.
@ Franco – True. But I’m talking about buying to live there. If one is buying as an investment then there is a real possibility of stagnation. But to live I think you’re still ok.
@ Craig – I don’t think you can look to buy with a short window of less than five years. Who can say what will happen? But longer than that and I think you’ll see values go up. But who am I to guess? Again if you’re looking for a home to live in for the next couple of decades then now might be a good time to buy.
@ffb
I agree, I think prices will soar again and there is only so much real estate around. I would love to buy an apt in my college town because I know how much contruction is going on and how much the school and town is expanding, and it’s already a huge school. Just wish I had the money to do so.
@ Craig – Yeah, no matter what you think the market will be you still need the money!
The one thing you have not considered is the potential opportunity cost. Even if this is the bottom for the housing market, if it just stagnates over the next decade, whatever money you put into your house will have little to no return. The opportunity cost on that money would be what you could have made in other investments (e.g. CDs, money market, stocks, etc…).
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Yeah, it’s hard to tell where the market is heading now, maybe still down but who knows.
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The rental market is pretty strong at the moment as many people simply can’t get a mortgage – so for people that do have the money to buy a buy-to-let property now may be a good time to buy. Can’t see property prices dropping too much more.
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The key would be if you have the cash and do you plan on keepng the property for the long haul.
Great points. Now is absolutely the time to buy. Personally I wouldn’t wait for it to get worse, that may bite you and you’ll end up finding the opportunity missed. I’ve been trying to tell people for the past 3 months, bad economy is only bad if you don’t know how to position yourself. Now is a great time to make investments. Stock prices are down, realestate prices are down. If you can get in now and then hold onto the assests for about 5-10 years you will turn a tidy profit. Just remember this is a long term investment, not something you are going to see a profit on in the next 2-3 years. Economies take a while to bounce back.
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