Tips for Deciding Whether to Buy a House Now

 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.

Don't Just Invest, Enjoy Your Investment

Many of you have probably been reading all the dire news about the real estate market lately. It was the worst July in 15 years, and the outlook for the rest of the year isn't great. I think we can safely say that those of us in the business already knew that, just by the lack of calls, sales, and closings. The articles in the papers aren't helping, either. They keep telling people that houses are no longer safe investments, guaranteed to go up each year and to outpace inflation.

But, really, what's so bad about that? Your home should be a place that you enjoy living in, and where you are happy to be without regard to appreciation. Over time, no investment goes up steadily; even ones which are extremely risk-averse do poorly when inflation is high. I recently had a friend tell me about his fancy new wine cellar. He is building it to display his 297 bottles of wine, most of which were bought as investments, after careful research. My friend knows exactly what they are now worth--just over double what he paid for them. As we laughed about his knowledge of the wine collection's appreciation, he downplayed the investment value. After all, he told us, even if their value goes to zero, they will still be available to drink and enjoy!

And what about a similar view for real estate? It's always been true that homes should be bought for more than their investment value, and buyers have always been aware that they shouldn't buy if they might have to sell right away. Although it's not quite the same as the fact that a new car loses its greatest amount of value just as it's driven off the lot, the costs of reselling property mean that there has to be some increase in price just in order to break even on a resale. What it seems that we've all been forgetting lately is the consumption value of living in your investment, and enjoying it in the short run. So try to think of real estate as a consumer good, which you can enjoy and use; while you are at it, maybe you should lay away some bottles of wine as a hedge for your bet!