Is This A Good Time To Buy?

There are two different answers to that question. But behind that question is usually hidden another question – “Is this the bottom?” I can answer that one easily – no, we are not at the bottom. The only way we’ll know for sure it was the bottom is when the bottom has passed. However, we do have indicators such as absorption rates, days on the market, list to sales price ratios and others that give us an indication of what’s ahead. And none of those indicators tell me that we are at the bottom yet.

So is it a good time to buy? If you’re an investor buying with cash and trying to catch the bottom then I would wait because we are not there yet.

However, if you’re buying a home to live in and you’re going to get a loan, than that’s another story! Interest rates are fantastic right now and the federal government will give you an $8000 tax credit if you haven’t owned a home in the last 3 years. You can buy a house with 3% down using an FHA loan. The financial markets are changing so fast that it’s impossible to say what loan products will be available 6 months from now or next year. With all the deficit spending the government is doing, rates are expected to go up, perhaps way up.

So what will it be like next year? Maybe home prices will be lower. But the $8000 credit will disappear at the end of this year unless it is extended. It may be much more difficult to get a loan at all, and if you can you might be paying a hefty monthly payment. That higher payment could cancel out any benefit you received by waiting for the lowest price.

The real estate market goes up and down, and it’s been said that a smart investment is one that you buy low and sell high. Are real estate prices high right now? Or are they low? If you buy when prices are historically high relative to wages and rents, it’s risky. If you buy when prices are historically low AND interest rates are historically low, then your risk is low.

You have to do your own homework and assure yourself that while this may not be the absolute bottom, it’s low enough that buying at these levels is not a high risk decision, but is indeed a low risk decision. And then relax, enjoy your new home, and know that you’ve locked in a really low payment for the next 30 years. Smart!