3 Questions You Must Answer Before Buying a Home
If you are thinking about purchasing a home
right now, you are surely getting a lot of advice. And most of that advice is
probably negative. Why buy now with prices still falling? Don’t you realize
real estate is no longer a good investment? Don’t you know that people who
bought five years ago lost their shirt? We understand the concern your friends
and family have. However, let’s look at whether or not now is actually the
perfect time to buy a home.
There are three questions you should ask before purchasing in
1. Why should I buy if house prices are still
We believe that
in most parts of the country prices will in fact soften in 2011. Price is the
major concern for anyone selling a home. When you are buying, COST should be
your primary concern however. Your monthly payment (cost) is definitely
impacted by the price of the home you purchase. The other major component is
the interest rate. Waiting for prices to bottom out while rates are increasing
can wind up costing you more over the life of the mortgage
Over the last seven weeks, rates have
increased over 1/2 a point going from 4.17 to 4.86. Looking at the attached
chart shows this increase. Waiting for prices to bottom out seems to make
perfect sense. Yet, at a time when rates are increasing, it might NOT make
sense. Make sure you have a mortgage professional help you with this math
before making a decision.
In recent article CNN Moneyreported:
“You can kiss
those record lows goodbye,” said Greg McBride, chief economist for Bankrate.com.
of HSH Associates, a provider of mortgage information said that the market
reached a new plateau.
“I don’t think
we’re going back to a 50-year low anytime soon without an economic collapse,”
he said. “Rates will probably never revisit those levels.”
2. When will I begin to see appreciation if I
This is a great
question. Macro Markets, LLC is a company that studies housing prices. They
started their Home Price Expectation Survey in 2010. They ask 100+ housing
industry experts to project housing prices through 2015. The most current
survey shows that the experts are predicting prices to soften until 2012. The
experts then project prices to rise reaching a cumulative appreciation
of over 10% by 2015.
Purchasing a home today makes great sense from a financial
standpoint. Think of the old axiom: You want to buy low and sell high. We may
be at the low point regarding the COST of a home. But, this decision should not
only be a financial one.
That leads us to
our third and final question:
3. Why am I buying a home in the first place?
This truly is
the most important question to answer. Forget the finances for a minute. Why
did you even begin to consider purchasing a home? For most, the reason has
nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons
people buy a home have nothing to do with money:
A good place to raise children and for them to get a good education
A place where you and your family feel safe
More space for you and your family
Control of the space
What non-financial benefits will you and your family derive from
owning a home? The answer to that question should be the reason whether you
decide to purchase or not.
The COST of a home will
probably remain relatively unchanged even if prices continue to depreciate.
Don’t allow money to get in the way of you making the right decision for you
and your family. In the long run, the finances will work in your favor anyway.