Below is a great post from another member at ActiveRain. His post simply shows how the difference in the Price of a Home and the interest rate on the loan go hand in hand. To any homebuyers that read this posting, if you have the want or need to become a homeowner, the best time is now. You can see what home prices and interest rates are today. Find the right home for a price that is affordable to today. As the economy improves, which I believe everyone wants Interest rate are more likely to increase and housing prices would most like increase as well. Only if you want the economy to decline more, should you hope for lower home prices. Jeff warns be very carefulof what you hear from others. With low rates as they are today and home prices having declined, I believe the upside risk is greater than the risk of higher prices and higher interest rates. Just my opinion, as Jeff says look at everything and then decide what to do.
Be very careful on what you hear from others when it comes to the real estate market
There is some news out there from realtors and so-called experts advising buyers to maybe wait for a year or so. This kind of stuff angers me for many reasons. Here is a question I just read from a potential home buyer:
"Where do you think home prices will be by the end of this year and by next June 2011 in New Jersey."
Answer by a realtor :
"I'll go with down 3% end-of-year and 5-6% by next June. Employment number continue to be terrible, so there is no hope of appreciation for the short term. There is also more and more inventory which will add to negative price pressure."
Nobody has a true crystal ball. All many of us can do is speculate, use our knowledge, expertise, and common sense. But if you are dealing with someone that doesn't look at something from both sides of the fence, to give you good knowledge and food for thought, it could cost you thousands of dollars.
Trying to determine when a good time to purchase a home can be frustrating at times. Asking yourself, if we wait a tad longer, we could get a better deal. What the realtor stated above, I will not disagree with. There is some logic to what he stated. But giving you this information and not taking it to the next level, could make your decision a bad one. Let's explore it some more.
Comparing future depreciation of homes by 3% to 6%
This scenario is taking into consideration that you are currently renting or that you own a home. So if you bought a home now and compared it to buying a home in 6 months, by December 2011, you would have gained slightly on the difference of equity by buying now. If you take in account the 3% difference in the home price in 6 months from now, and the fact that your payment would be $33.32 more a month, you would have spent $399.84 more in mortgage payments. Yes, you would have bought a house for $7,125 less with the 3% depreciation, but by December 2011 that difference would only be $5,044. Then subtract the $399.84 in extra payments, then that difference drops to $4,644. KEEP in MIND - You will also be starting an interest deduction sooner if you bought now also, which I didn't figure into the whole equation. Which means you would write some of this off in 2011 which you would not have until 2012 if you bought at the end of the year. (my main focus was just showing if you bought now than in 6 months from now)
Summary : You need to ask yourself these questions.
- Why are you buying a home?
- Can you actually afford to buy a home now?
- Focus on your mortgage payment and not your interest rate. Meaning, what mortgage payment are you comfortable with.
- Review your goals. Your 3 yr, 5 yr, and 10 yr goals. The average person stays in their home for 6.7 years.
Overall, you hear so much talk about people being upside down in their homes. Ignore this and go back to my questions, the main reason to why you are buying a home. It's normally a long term investment, a place to grow with memories, to raise a family, and so many other reasons. There is no crystal ball that tells you what interest rates will be in 6 months or where home values will be. Think clearly before listening to just one side.
Buy now or wait ??? If I was in the market to buy, felt comfortable, had all my ducks in a row, I would buy NOW.
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