Not An Easy Answer
For years when asked the question, "Is this a good time to buy a home?", my stock answer was "Today is good, yesterday was better." Most of the time, this question was related to interest rates. When rates were high, people wondered if waiting awhile was in their best interest. Homes were appreciating at a pretty good pace, so buying now and refinancing down the road made sense. Keep in mind, these were folks buying in the Chicagoland area and we had not seen a real downturn in prices in the 18 years I've been doing mortgages. Oh sure, some areas had stagnant growth back in the mid to late 90's, but the overall area, kept chugging along.
Now, it's a different ball game! We have seen values fall across the general area. Our drop is not as big as many parts of the country, but none the less, there has been a drop in prices. So, now what's the advice?
Buy!
Ask yourself this question, "Are you looking for a place to call your own and maybe raise a family?" If yes, then find a stable area, not too many homes on the market, not too many foreclosures or short sales, and buy! Sellers are motivated to sell their home. Notice I said to sell their home, not give it away!
- Be pre-approved by a reputable lender. Ask friends and family for referrals.
- Know how much closing will cost you and set that money aside.
- Know how much your monthly payments will be and make a budget.
- Make a reasonable offer.
- Don't fall in love with a property and make irrational decisions. An example would be if a home inspection reveals faults that the seller won't cure and you can't afford to fix, walk away.
- Be careful of any "special programs" that you qualify for and are offered to you. These programs are usually the first to go when a lender tightens up credit guidelines.
- Take a fixed rate program only! Let me repeat, take a fixed rate loan program. The reason you are buying is because you are planning to be in a home for many years. Why take the risk of an adjustable rate? If rates come down, you can always look into refinancing.
Wait!
Now might not be the time to take a gamble on a short term purchase. If you think you might only be in a home for a few years and then have to sell, it might be better to rent. We may not have hit the bottom yet on values. If you don't have the down payment, you might be forced to wait to buy. FHA will still allow you to receive a gift for any or all of your down payment, but that has to be a true gift from a family member or close friend. Down payment assistance programs will not be allowed after October 1st and many lenders have cut them off already. (Disclaimer: I know these non-profits are fighting this ruling and things could change in the future, but here is where we stand today.) Is your job situation shaky? Could you be laid off or downsized in the near future? If yes, you might not want to sink your money into a home that might be hard to sell if you need to get out from underneath.
Toss Up
Investment properties and second homes are kind of case by case. Yes there are deals out there, but lending standards have really tightened on these type of transactions. If you have a real strong financial base, it might be a good time. If you are stretching, you might not find favorable financing for your purchase. Again, check with a lender before you commit to a contract.
Up To You
Now when I'm asked "Is this a good time to buy a home?", I'm not so glib. It's time to look at the whole situation, your needs, your expectations, your qualifications and decided from there. Sure prices may fall some more. Rates are pretty good. You ever buy a stock at the absolute lowest price and sell at the absolute highest price? I haven't. I've made money buying and selling stocks by buying at a reasonable price and selling at a reasonable profit. Maybe all this housing market needs is some reasonable and rational thinking.
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