Have you ever wondered if buying a house now is a smart move? Many intelligent economists believe that the market is not yet at its bottom, which means that the price of housing could plummet even further than its current lows. With this outlook, it would be smart to wait before purchasing a house, right? Well, not necessarily.
Are You Renting?
As we all know, renting is not always the smartest financial decision. Sure, you won’t be held responsible for that water heater going out or the roof leaking, but in the long run, owning a house is typically a wiser move financially than throwing your money away renting. This is why wealthy businessmen own rental units – they earn more in rental dollars than they do keeping up the house.
If you suspect that the market is going to take down the value of real estate, you might be inclined to wait and see what happens. However, by waiting, you are throwing more money away in rent. It would most likely be smarter to buy a house now, and build up some equity in a property, rather than worrying if the price of the housing market will decrease.
What About Interest Rates?
Interest rates are currently at an all-time low. I don’t think it’s possible for them to go any lower. Right now, you can lock in a 30 year mortgage with a rate of 4.5%. If you would take out a 15 year note, you could get interest rates as low as 3.75%!
I don’t think I would have to try too hard to convince you that these rates will not decrease much more. More than likely, they will begin to creep up again throughout the rest of this year and into the next.
Economists may predict that the value of real estate will still go down, but chances are the interest rates will begin to go up. This is another reason that you should buy a property now.
If you aren’t convinced, here’s an example of what you would end up paying for your home if you waited and allowed the house value to decrease while the interest rates increased:
Current Housing Conditions
- $200,000 home @ 4.5% interest = $364,813 after completing 30yr note
Future Conditions – House value down, Interest rates up
- $175,000 home @ 6.0% interest = $377,717 after completing 30yr note
In the example above, the house value dropped $25,000 (because you waited)! But, with the rising interest rates, you will still end up paying $13,000 more than if you would have just purchased one today.
John’s Comments – Derek makes some great points on waiting versus buying a house now. I wanted to add that in order to get in on the lowest of interest rates, make sure you get your credit score up and under control if you have had problems in the past.
Why Not Start Looking Now?
If you are starting to think about purchasing a house, don’t be afraid to start looking around! Some of the best deals can be found with foreclosures and short sales, but these can often times take the longest to close (for short sales, sometimes almost a year!). So, if you are contemplating a house purchase in the next year, start perusing those “For Sale” listings online and in your local newspaper. You never know when you’re going to find the perfect house for you.
Are you thinking about purchasing a house? What’s holding you back?
This post was written by staff writer Derek.
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- Don’t Become House Poor: Follow-Up
- Buying a House? Don’t Become House Poor
- 5 Extra Expenses of Entertaining House Guests
- What is a Fixed Rate Mortgage?
- How to Make Your House Impact Free
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I think it is better to start buy the house from now since the price will be up in future.
I completely agree with you Dana. While the prices won’t be up in the near future, chances are that after 5 years, the property will be up in value and prove to be a great investment.