Why It Is Always a Good Time to Buy Your First Home
This is the fifth installment in our First Time Buyer Guide, a regular Monday morning feature designed for people who are just entering the real estate market. Not your first time at the rodeo? You'll find some good tips in here for buyers at any stage!
“Is it a good time to buy a house?” is a question Realtors hear a lot.
My father, a Realtor for many years, had a stock answer. “Yes!” At least, there are always good reasons for someone to buy, and it might be you. My dad was also a very honest guy, and happy to let his clients know the potential risks and benefits, in any market.
In 2007, the U.S real estate market took a nose dive, making buyers more wary, and filling would-be sellers with regret. Property values fell across the country and foreclosures were on the rise. The real estate slump was so severe that it caused a ripple within the credit industry, leading to a recession.
When asked about the recession, smack in the middle of it, my father wasn’t worried, “I’ve seen this before. That bubble will burst sooner or later.”
And he was right. Home prices and sales are on the rise. People who’ve been hanging onto property in hopes of a higher sale price are back in the market, and investors are less fearful. When mortgage interest rates are low, more potential buyers enter the market.
Read more → Home Prices Rise 5.7% in December: S&P/Case-Shiller on CNBC
Property appreciations were recorded across the US, a good sign for homeowners and the country as a whole. From the east coast, including New York and Florida, to the west coast, including California and neighboring Nevada, home values are rising and the market is recovering.
So, with all this good news, is now the best time to buy?
Of course it is! Maybe, depending on who you are and what you need. But 2008 was a good year to buy too, for some people. So were 1998, 2001, and 2005. This year is looking good, too.
Why buy in a “bad” market?
Well, if you’re a first time buyer, you win. You’ll be buying low and quite possibly selling high some years from now. Besides, first time buyers often qualify for special rates and incentives on mortgages, making it easier to afford more house for less.
But let’s say you want to sell your home and move somewhere larger because your family is growing. Or you’ve just gotten a job in a new town, and you need a place to live. (Most employers don’t take kindly to people who sleep in the break room.) You can rent out your current home instead of selling, then rent your new place instead of buying, or buy a second home if you can afford a new mortgage. When less people are able to buy, more people need to rent, so you may be in a position to command enough rent to cover the mortgage and maintenance on your old place. Voilà! You’re a landlord, practically a real estate mogul. And with your first place paying for itself, you may be in a position to buy another primary residence.
Another good reason to buy in a down market is simple: You love the house, and you can afford it. Lenders and buyers have learned the risks of upside down mortgages (when more is owed on a home than the home is worth), and you should consider those risks. No matter the financial climate, no purchase is risk-free, but many people prefer to have their funds go towards equity in a home, rather than into a landlord’s pockets, with nothing to show.
Your financial situation is unique, and buying may be better for you than renting.
I’m excited! Count me in! Why not buy?
Even my enthusiastic father would admit there are a few good reasons not to buy. If you just can’t afford a home that is a good investment, you should wait. If your credit score isn’t what it should be to secure a better mortgage rate, find out how to raise your credit score, and look for a home when you get there. Research the area you want to live in, take your current ability to pay your bills into account, and talk with professionals to minimize your risk of ending up with more mortgage than you can handle.
Are you likely to pick up and move in the near future? Unexpected moves happen, and there are ways to handle them, but if you have no intention of keeping your home for at least five years, renting is probably the best option. Real estate is a good long-term investment, and can require patience, and the financial ability to hang on to a place until the market improves.
Low interest rates and new homes on the market are great reasons to buy, but only if you’re ready. But don’t worry, sooner or later, it will be a great time to buy -- for you!
Read the rest of the series→ First Time Buyer Guide