With all the activity around the country in residential sales, many buyers and potential buyers are wondering whether it's time to sit out the rush to ownership. Even without the emotional turmoil caused by frantic bidding followed by disappointment, they are nervous about the economics of buying. Here are some tips to consider:
1--Most importantly, what you pay every month is the key factor in deciding what you can afford. Although home prices have risen rapidly in many price ranges, interest rates are still low. Once you know the monthly payment associated with a given purchase, you can compare that to your total earnings. Interest, over the life of a mortgage, makes more difference than a few thousand dollars in cost, so keep that in mind;
2--Buying at higher prices is not as risky if you plan to stay for awhile. Americans in general are staying in their homes longer than they used to do, and most price rises even out over time. Just as you are unlikely to buy at the very bottom of a market, you are statistically unlikely to be purchasing at the very top;
3--With that in mind, consider the likelihood of having to sell quickly for some reason. If you are prone to be transferred often, are looking to change jobs, careers, or location, you might decide to wait. Real estate, although it is a great investment, is illiquid, meaning that you can't just take your money out whenever you need it. If there's a high probability that you might have to do that, you should probably wait;
4---Next think about whether you might decide to move again within the area. If so, that's less risky, because it's fine to buy high if you are also selling high. If all the homes go up in a region, and you are planning to remain, you will just conduct that next sell/buy at a higher price point. You will have more equity, and you will pay more for the next property, in an inflationary scenario;
5--Inflation figures into the equation in another way. If you have basic living expenses that will be disproportionately affected by inflation, and you do not expect your income to match the rise, then you should be more conservative. For instance, your grocery bill and your income will likely rise or fall together, and eating out is not a requirement, so doesn't have to stay constant. Suppose, however, that you drive for a living, and gas prices take a big chunk of your monthly income--that might be a reason to worry more about inflation. It all depends upon whether you are more or less impacted by generally higher prices;
6--We are heading into the fall bumper season for real estate. If you've been shut out in the spring market, more houses will be coming on the market right after Labor Day. Sellers are at their most flexible in the late fall (actually, between Halloween and Thanksgiving), so you just might get a better deal soon. That should give you hope that you can be in your new home for the new year! Whatever you decide, we are here to help you.
