15 reasons you shouldn't buy a home now.. 5 reasons you should

By
Real Estate Agent with Henderson-Sotheby's International Realty

Should I buy a home in the Princeton area now or wait?

This is a question several Princeton Real Estate blog readers asked this week. I had to finally bite the bullet and answer, even if the  answer is "I don't know", because I don't know you.            Should you but princeton real estate home

Quite honestly, this post has been in a draft mode for a while for this reason. The goal of my blog is to answer important real estate questions for the Princeton home buyers and sellers. "I don't know" or "it depends" (in the words of my Phoenix colleague Jay Thompson) somehow didn't seem satisfactory. I am an expert, shouldn't I have a definitive answer. I do have an opinion. I am happy happy to share it with a buyer, after I understand more about him/her, because there is no "one answer fits all". It depends on the buyer's views, finances and where and why they are considering buying.

For my Internet readers whom I don't know, I will try to answer the question the best I could. I limit my points to the greater Princeton area market, although some concepts could  apply elsewhere as well.

The first priority is to look at some of the reasons you shouldn't buy now.

You should not buy if you....

  • Believe that home prices always go up;
  • Don't have emotional tolerance for market declines;
  • Know that the prices will drop further and when;
  • Know that the interest rates will continue to significantly decline;
  • View the house primarily as an investment, rather then a place to live.

 

  • Don't have a substantial (20%) down payment;
  • Can't afford all monthly costs, associated with home ownership;
  • Don't have enough savings, in case you loose all or part of your income;
  • Are not certain if you can stay in the house for at least 5 years;
  • Do not like chores associated with homeownership.

 

  • Don't mind switching homes when the landlord doesn't renew your lease;
  • Don't mind moving, when the landlord increases the rent;
  • Don't mind less choices of homes available for rent;
  • Have the space and location your  family needs;
  • Don't have the space and/or location you need, but are willing to sacrifice.

If some or all of the above applies to you, I don't think you should buy now. "Yes" answers to some of the above, could mean you should not buy at all. Some "yes" answers could mean you should wait. For example, if I knew exactly when the home prices would be at their lowest (which I don't), I would for sure wait till then.

Here are some reasons you should buy now...

  • You want a large choice of houses, which the Princeton rental market does not have;
  • You know that long term house leases are rare in Princeton, and you don't want to move often;
  • Stability is important to you because of schools, commute or other reasons;
  • You know that home prices have declined in many neighborhoods, and you could pay less now for the same house, then several years ago;
  • The interest rates are relatively low, but could increase.


The national media and the press would make you believe that somehow, there is a formula or a specific piece of information that could give you the magic answer. I don't think so. The answer depends on your finances, and your system of beliefs. If you are still undecided, you can learn more about Princeton real estate market in these articles.

How is the Princeton Market? - real estate statistics and analysis for January 2008 

Princeton real estate -local or global ? - review of the differences and similarities in the local and national real estate markets

Princeton real estate statistics -2007 summary 

Princeton area real estate housing prices - review of prices for the period of 2004-2007  for Princeton, Hopewell, Pennington, West Windsor, and Montgomery Township.


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Please contact Faina Sechzer at 609-553-4175 with questions about real estate, homes for sale and/or listing your house to sell, and relocation assistance in Princeton, Montgomery Township, West Windsor, Hopewell, and Lawrenceville New Jersey. Referrals are accepted.
If you are moving out of the greater Princeton area, please inquire about the countrywide relocation program.

Copyright   2007 Faina Sechzer All rights reserved. This information cannot be copied, reproduced, transmitted, distributed, displayed or published.

 

 

 

 

Comments (14)

Chuck Christensen
Your Financial Coach - Bellingham, WA

From a Financial point of view..."It is always a good time to buy". A home should not just be looked at as a place to live. It is usually every families biggest investment and should always be part of their portfolio. Learn the rule of 72 to help figure your rate of return on your investment. The average house has always doubled in 10 years. If you divide that by 72, then your investment would have a 7.2% rate of return. You can then add what you paid down over that period of time and that increases your rate of return. So even if you had an interest only loan...you still made money and it was a good investment.

Rate are low, and prices are low...this very rarely happens...that makes it a great time to buy! Never in the history of the stock market has their ever been a time that if you put money in at the highest point that month, and took it out at the lowest point that month 10 years later, you would have still made a profit...check out an Ebitson chart.

The Feds can and will continue to drop rates....to stimulate buying goods and services, but it has nothing to do with mortgage rates...that is for short term loans. Mortgage rates are driven by the 10 year Treasury Bond market. Bonds continue to go up due to the uncertanty of the market...though most bond funds average a 2 to 4% growth...they are considered a less risky investment.

 

Mar 04, 2008 10:36 AM
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Wonderful overview Faina. Another reason not to buy a house is if you are going to live in it less than two years. General rule of thumb.

A reason to buy, you have a long term view on where you want to live AND look at the choice and interest rates today. WHAT A DEAL!!

Note to Chuck: Some houses in our area have gone down in value in ten years. Real estate is local.

Mar 04, 2008 11:00 AM
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY
I love this overview..Well done and well thought out - and worth the time it spent in draft mode.
Mar 04, 2008 11:09 AM
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services
Faina- I love it! I love the way you spelled out the reasons you should not buy right now! This is the best buyer info I have read all week! 
Mar 04, 2008 11:15 AM
Kathy Clulow
RE/MAX All-Stars Realty Inc. Brokerage - Uxbridge, ON
Trusted For Experience - Respected For Results
Faina - Very appropriate answers!! We can only guide based on information currently on hand, folks who think we have a crystal ball just do not understand the dynamics of the real and counselors to mention a few but never fortune tellers
Mar 04, 2008 03:10 PM
Faina Sechzer
Henderson-Sotheby's International Realty - Princeton, NJ
Real Estate Expert - Princeton, Montgomery ,Hopewell, NJ
Chuck -the consumers out there are very sceptical when they hear "buy now" and that real estate is a good "financial investment" proclaimed by the real estate agents. It sounds too self serving. Many of them are right - for one reason or another buying real estate now or ever may not be a thing for everyone. Thanks for your comment.
Mar 04, 2008 10:40 PM
Faina Sechzer
Henderson-Sotheby's International Realty - Princeton, NJ
Real Estate Expert - Princeton, Montgomery ,Hopewell, NJ
Gary -can't agree with you more. This is one problem with dispensing generic advice about real estate, for example like NA often does. "Houses double in value in 10 years" -like you said, it's not necessarily so. The points I made would apply to many places, but I can only speak with confidence about my local Princeton market.
Mar 04, 2008 10:45 PM
Faina Sechzer
Henderson-Sotheby's International Realty - Princeton, NJ
Real Estate Expert - Princeton, Montgomery ,Hopewell, NJ
Katerina - I am glad you like the post and thanks for stopping by. The original post was very long and tried to answer every possible permutation of reasons and conditions for why someone should or shouldn't buy a home -that's why it never saw the light of day:). 
Mar 04, 2008 10:48 PM
Faina Sechzer
Henderson-Sotheby's International Realty - Princeton, NJ
Real Estate Expert - Princeton, Montgomery ,Hopewell, NJ
Kathy -I wish I had the crystal ball. I could think of several good uses. Unfortunately, I don't have a crystal ball, nor can perform miracles, nor foretell the future. That's why I write for the Princeton Real Blog. 
Mar 04, 2008 10:52 PM
Kathy Clulow
RE/MAX All-Stars Realty Inc. Brokerage - Uxbridge, ON
Trusted For Experience - Respected For Results

 Faina - Part of my comment disappeared this makes no sense at all

It Should have read

Faina - Very appropriate answers!! We can only guide based on information currently on hand, folks who think we have a crystal ball just do not understand the dynamics of the real estate market place we are advisers, negotiators, marketers and counselors to mention a few but never fortune tellers.

I trust this makes a little more sense

Mar 05, 2008 12:51 AM
Jay Thompson
Zillow - Seattle, WA

Excellent review Faina! (and thanks for the link).

Chuck said, "The average house has always doubled in 10 years."

The problem I see with that is it is a gross generalization. What is an "average" house? Real estate *is* local, sometimes down to the subdivision level within the same city. 

Mar 07, 2008 02:02 AM
Faina Sechzer
Henderson-Sotheby's International Realty - Princeton, NJ
Real Estate Expert - Princeton, Montgomery ,Hopewell, NJ

Jay - thanks for the kind words. I subscribe to your blog and respect you as a very influential blogger and experienced real estate practitioner. Chuck's view is the same as what NAR is advertising to a great discomfort of those whose house prices did not increase that much, if at all. 

I was planning to give you a call. Thanks for your comment. 

Mar 07, 2008 03:44 AM
Pam Winterbauer
Pam Winterbauer Real Estate - San Ramon, CA
"Providing Blue Ribbon Service"
You have done a remarkable job explaining the process.
Mar 13, 2008 04:29 PM
Chuck Christensen
Your Financial Coach - Bellingham, WA
Thank you Faina and yes I look at a house as a Financial Investment...because I am also a Licensed and Registered Advisor with World Financial Group. In most places, housing has averaged more than a 7.2% increase...I am sure that is going to be down lately...but 2 years ago in most areas we had unrealistic growth in prices to make up for the down fall....the market is just comming back to reality....hehehe
Mar 13, 2008 05:20 PM