Top Five Reasons to Buy a House NOW, and Top Five Reasons to Wait

Wow.  It's been over a week since I posted.  I feel like I did when I turned in homework late at school.  All I can say is, if my last week has been ANY indication, the residential real estate market, at least in the Fan, Museum District, Church Hill, Northside AND Near West End of the City, is picking up steam.  BIG TIME.  More on this later, when I find the time to post specifically on the issue.

But, I did see this article, and since it basically encapsulated what I and other Realtors have been telling our buyer clients, particularly our first-time buyer clients, about why they should buy, I thought I'd post it here.

The five reasons are the same ones I've been repeating ad nauseum to my buyer clients, although probably not as articulately or in the same order.  I'm sure they are tired of hearing it, frankly.  They are:

1. Affordability is the best it's been since the National Association of Realtors started tracking this measure in 1970.
2. Inventory is high.
3. Builders are offering big discounts.  [NOTE:  I never use this one, because I rarely sell new construction].
4. Mortgage rates are at historical lows.
5. First-time home buyers qualify for an $8,000 tax CREDIT - that's take $8,000 off anything you might owe the federal government for your 2009 taxes - if they buy before December 1, 2009.

Now, in the interest of full disclosure, there is a companion article titled "Five Reasons Not to Buy a Home This Year."  Those reasons are:

1. Prices are still dropping.
2. This sale will be on for a while.
3. You may not stay put.
4. Your job may be the next to go.
5. Your cash reserves will be eaten up.

All of these are legitimate reasons not to buy in this environment.  I will say, in the Fan, Museum District and certain near West End neighborhoods, I'm not buying Nos. 1 and 2, at least not much longer.  I don't believe "prices will continue to drop" and "the sale will be on for a while."  What's happening now is buyers are BUYING in these areas, bringing the inventory, i.e. supply, more in line with demand.  Buyers, listen up here:

That means if you want to buy in one of these areas, you will not have as much leverage over sellers as you seem to THINK you will. 

This is basic economics, folks.  As supply and demand come into balance, prices will rise.

Now, I DO strongly believe Nos. 3-5 are legitimate reasons not to buy, although you may be sad later to have missed the major bargains.  But if you think you are likely to move soon, you are concerned abut your job, and/or you have limited financial resources should you lose your job, I think continuing to rent might be the smartest approach.

OR....maybe a lease/purchase would be a good option, locking in today's bargain sales price and giving everyone time to weather this economic storm.  Just a thought.  I'd be happy to help you with one of those.  [;)]

Comments

[Melissa Loughridge Savenko]

Dear Randy: Thanks for the comment, I agree with all your thoughtful points. And I love that I have a reader out in Idaho. Thanks!

[Randy Gridley]

I’m often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don’t know where the bottom is until you see it in the rear view mirror, meaning until you’ve missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It’s important to live in a home that reflects your taste and values, yet is within your financial “comfort zone.” To that end, it may be more important to lock in today’s relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

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