Great time to buy a home ... IF ...
77Definitely a great time to buy a home ... IF
This column is an answer to a request about home purchasing, July, 2008. Although not a real estate broker or agent, have been purchasing homes since late 70s, have been through seven homes last ten years (my husband has a very active/mobile career) and have seen tons of activity over the decades in several housing markets across the USA.
IF ... you are currently renting a place. MUCH better to pay on a mortgage with all the associated tax deductions on your mortgage than paying rent. This is a very short statement, compared to others below, but it's very financially important. Think of all those taxes being withheld from your paycheck...would you like to get a lot of that back? You can if you have a nice juicy mortgage deduction. But read on.
IF ... the home you want has affordable "fixer upper" related costs. Does it need new plumbing, new roof, new carpet (cheap, relatively), repairing a rotted deck or a driveway cracked and disintegrating from the spreading roots of the "gorgeous" huge shade tree in front yard (that will die and cost $800 to remove once you kill it's roots from 'fixing' the driveway). Do you like the home, neighborhood, school district, etc. enough to consider these additional costs worthwhile? Especially since roofs, plumbing, etc. will last decades, and in this buyer's market, the seller might negotiate.
IF ... you can afford all the doo-dads that apt./flat renters often don't require. Lawn Mowers, power washers, washing machines, new refrigerators, updated light fixtures, rain gutters, sump pumps for that flooded basement ( that you may not learn about until it's already flooded), termite/pest control contracts, lawn services, tree maintenance, storm windows, caulking guns, attic insulation, storm doors, space heaters, better cable system, more cable outlets for your entertainment system fantasy, the wife's desire for new furniture for the 'new' house, your desire for a pool table, bar stools, paraphanalia for the basement rec room, and so on and so on and so on!
The unemployed husband of your wife's baby sister now lives in guest bedroom
The lovely shade tree that fell, when roots killed trying to repair a cracked, disintegrating driveway...one example of unforeseen home repair costs!
IF ... you can truly afford a 'regular' stable mortgage. This means, you won't be a victim of these 100% adjustable interest rate mortgages that got so many people into mortgage/foreclosure troubles to begin with! On CNN just this evening was the report of a woman who committed suicide rather than give up her home to foreclosure...heartbreaking!
IF ... you can realize how low mortgage rates are... although higher than 2 years ago or so...they're still quite, quite low. In the early 1980s, mortgage rates climbed as high as 14% !!! YIKES !!!
IF ... you believe in history repeating itself. Because if you do, the circumstances that the USA is currently mired in...once repaired, will result in continuing long term high unemployment and rising interest rates...so buy now and be happy when rates hit 8%, 9%, 10%.
IF ... you take a look at the home's current heating/air, assorted electric and other utility costs and understand they may go up 15% a year for 3 or 4 years before settling down. They'll never decrease, but they will settle down.
IF ... you can handle a long commute and the related gasoline/automobile costs. Many houses that are real bargains right now are "OUT" in the newer developments, where homes often less expensive to begin with. When gas was cheap...all you had to lose was the time of your commute...now you're looking at really expensive gas! I remember when gasoline hit One Whole Dollar!!! We all believed it would ultimately return to a less expensive cost !!! We believed the same thing at the shocking price TWO DOLLARS...and then the horrid, astounding THREE !!! (I am not old, at least not elderly, can't even get a senior ticket at the movies...but when I started driving, gasoline cost 25 cents per gallon.) Think ahead...the future slams into your life much quicker than you'd ever imagine!
IF ... you understand the burden of the area's property taxes. Also, do some research...are the school's in the area good because the town agrees to re-tax itself every two years or so? Is this something you want to do?
But then again...consider these
IF ... you have, or plan to have, children, are the schools important to you? Take a look at the school's ratings within the county, the state. If they're not so good... do you want this area? Will you find yourself paying for another move way too soon? Could you afford private schools for little johnny if the situation arose?
IF ... you or the Missus have trust funds from grandpa sittin' around to get you through your own unemployment trauma that could roll around any time now!
IF ... you foggily comprehend that the moment you have a guest bedroom and some driveway space, that in this economy one of your relatives IS going to have hard times and you'll likely wind up sharing your new home with others, out of the goodness of your heart?
IF ... you DON'T have a house to sell ! ! ! 'Cuz with the way the USA going right now...you'll never unload the old one to get your new one!
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Comments
It will be a great time to buy a house, desert blondie ... if ... this country returns to sanity and doesn't continue down the road George W. Bush has put us on --- absurdly high gasoline prices, mortgage speculation and failures, stock market tailspins, extra-military adventures, Constitutional revisionism and on and on.
John, thanks for brining up the costs of financing/selling a home. That 8-10% to sell a home is a major expense...so, buyers, know your time lines, as John mentioned.
Torpey, I agree. Lots of issues you mention do make the economy a bit scary now.
Great hub on a touchy topic! Thanks! I moved to Michigan just before the subprime mess hit hard, and now my house in Indiana is rented because I can't sell it at any price. Right now I'd say the value is about half of what I paid for it in 2005.
I think we got one of the last mortgages written in Michigan. What a mess. Hopefully someday I'll be able to unload that second house. I try to pay extra each month, get that principle way down in case the market ever comes back I'll put it up for what's owed on it and take a loss. At least the home we live in is inexpensive and the rate is fixed. Thank God for that.
Another fine piece of work from you! I admire alot about the Hubs you post - but I especially appreciate your prolific content and varied topics! I can see how, for writers, "practice makes perfect".
OH, Grundy! So sorry about the house in Indiana ... but with all this mortgage 'stuff' you should have no trouble keeping it rented, at least. Good luck! thanks for the "great hub" compliment...from you this means a lot!
Marina, Thanks for stopping by and thanks for compliments...they really make my day so much brighter...yes...LOL...I'm needy!
Nice thoughtful hub :)
It's still not the time I believe, America needs a few more years to get rid of "irrational exuberance" before market can turn back up...
Misha, thanks for stopping by...for buyers, this low time could be good fortune, IF they've got "their ducks in a row" as the saying goes. For sellers right now, boy, I'm feeling sorry for them if they have circumstances where they HAVE to sell right now, especially if they've only owned a few years. Not so good for them at all!
wow I think you know this topic...its so scarey now. Our housing is furnished by our job, but that doesn't stop me from feeling the pain of so many. Some store because they're getting kicked out, others store for business and have problems finding customers. It's just a hard time...people used to store because they were moving into a new house soon....not so much now!
I know a new election is not the end of all our troubles...but it's a huge start!! Hope is fading fast. =) great blondie, great information and topic!
Thanks Marisue...I remember the last time we had a candidate of Hope and Change...it was Jimmy Carter. He had such an uphill battle, and USA was not prepared for the slow pace of change. Only one term for Carter. Then, a new 'maverick' of Change and Hope... Reagan. My thoughts on this coming president are, that he's in for uphill battle, no matter which party chosen. USA's in for a very tough time...much longer than these current 2008 struggles. AND the world markets are so much more fully developed then ever in USA's timeline...a new factor we've never really dealt with before.
I love your advice! I am believing history will repeat itself. I think current homeowners have to believe it. We have to have hope. :)
This is great information for someone trying to make the decision. I have next to no familiarity with the real estate market, and lots of prospective first-time homebuyers don't either. This is phenomenal stuff to make available to them - kudos to you for providing people with the voice of experience on matters that would probably never have occured to them until it was too late. In writing this Hub you've probably just saved a lot of people a lot of needless travail in their lives - and in a difficult climate like this, people can use all of that they can get. Good lookin' out!
Thanks, Satori...I appreciate the wonderful feedback. Buying a home is such a combination of wonderful and stressful ... there are so many issues at hand beyond the 'mere' price of the home!
Great hub! I'm in Arizona and right now everyone is trying to get rid of their homes anyway possible. I would love to buy right now, but definitely cannot afford it. I'm going to book mark this page, so that I can use it as a reference when I'm finally able to start considering to buy.
Glad you thought info. helpful...yep, lots of costs and considerations when homebuying time rolls around!
Nice job Desert blondie... I liked the way you put this together with all the 'If's'... it comes across very objectively, giving readers valid points to ponder.
From the perspective of a Real Estate Professional, I can confidently say this is the time when the real estate investors will buy and over time, their wealth will increase.
To Christine...I'm actually with you, despite the 'negative' points that I make here...This really is the time to buy...IF you can really afford it and NOT become another 'subprime mortgage' mess statistic. BUT IF you're one of those who's ready...starting a life, starting a family...THIS is a wonderful time to be buying!
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John Chancellor says:
5 weeks ago
You make a very compelling case. A major purchase like a home is never black and white, clear cut. It depends on lots of factors.
An additional factor is how long you plan or think you plan to be in the home. The transaction cost of acquiring or selling a home are very high, buying around 2-3% of the cost of the home and selling around 8 - 10%, so you need to either get a steal or occupy it long enough for appreciation of value to cover the transaction cost.
If the circumstances are right, this is an ideal time to buy ... so long as you read and understand all the "Ifs". But as the song goes, "I don't believe in If anymore ...