Is Now a Good Time to Buy a House?
It's the most commonly asked question of economists and realtors, the question that is
on the minds of most buyers. Is this a good time to buy a house? The answer depends on
a number of personal factors, but the general response in most cases is - yes. It's
nearly always a good time to buy a house.
Buying a house for quick profit
Of course, that answer is qualified by a number of factors. For instance, what's your
reason for buying? If, for example, you're buying with an eye to turning a quick profit,
some experts suggest that you have about another five years before the current trend in
rising house prices slows or evens off. As long as house prices are rising at 15% or more
per year, it's possible to make profits of as much as 100 - 200% of your initial cash
investment. A $10,000 down payment on a $200,000 property has the potential of netting
you over $20,000 profit if the property value rises at 25 - 30%.
It depends as well on the market in which you're buying. In some markets, notably urban
centers on the East and West coasts, real estate prices and values are rising at astronomical
rates. A savvy investor with a nose for a good deal can conceivably turn a profit in the
high double digits by 'flipping' a piece of real estate - selling it within several months
of buying it.
What about those that say that the
real estate bubble is going to burst and people are
going to lose money on their houses? Again, the answer depends on your intent for
buying a house. Even the most negative of the naysayers agree that housing prices
aren't likely to drop much, if at all. If you're looking for a quick profit in high-turnover
real estate sales, experts suggest that you keep your ear tuned to the unemployment and
interest rates. If they start to rise, home sales will slow down and prices will either
even out or drop. As long as the interest rates and unemployment rate remain low, it's
a good time to buy a house as a quick turnover investment
(flipping houses).
Buying a home to live
What if you're looking for a home rather than a house? You're still in luck.
Over the short term, there is a chance that home prices will drop.
On the other hand, odds are extremely high that home prices will be
higher in the long term. In other words, real estate will continue to be what it has always been - a steadily
appreciating, long-term investment. If you plan to buy a house and will
be living in the home for at least five years, it may not matter so much
what happens with home prices now. Home prices could fall as a result of
rising interest rates, but a lower price home might not save you much.
For instance, if you finance the entire $400,000 home with a traditional
30-year fixed mortgage rate at 6 percent. Then, your monthly payments
would be $2,398. If now, we assume due to rising interest rate, the home
prices fell to $350,000. If you finance $350,000 at 7 percent, your
monthly mortgage payment would be $2,328. As you can see, it's really
not much a difference from today's payment on a $400,000 home.
It is always a good time to buy a house as long as you know how to take
necessary steps to protect yourself against a downturn in housing
prices. If you've bought a home, experts say, this is the
time to put as much into the paying off the principle of your mortgage as possible.
The more you put into the principle, the higher your equity in the house when and if
you do decide to sell. Never take up crazy mortgages loans
such as adjustable-rate, interest-only, option-payment ... and other
risky mortgage loans that will get you into trouble should the home
prices soften and interest rates rise.
Most importantly, buy the home that suit the type of mortgage you can
afford; do not change your mortgage to suit the home you 'want' to buy. Most experts do
agree on one thing - the longer you own your
house, the more your investment will be worth. If you're buying during a hot real
estate market with prices at all-time highs, they suggest that you plan to hold the
property for at least five years to see a real profit in it.
Is now a good time to buy a house?
The absolute bottom line is, of course, your own finances. If you're in a position to
support a monthly mortgage, if your credit is good enough to qualify for low interest
rates, and if you expect to live in the house for at least five years, then you're
almost guaranteed a profit when you sell. If you love the house, and know that you
can afford the mortgage - it's a good time to buy a house, no matter what the market might do.
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