Is Now a Good Time to Buy a House?

It's the most commonly asked question of economists and realtors, the
question that is on the minds of most buyers. Is this a good time to
buy a house? The answer depends on a number of personal factors, but
the general response in most cases is - yes. It's nearly always a good
time to buy a house.

Buying a house for quick profit

Of course, that answer is qualified by a number of factors. For
instance, what's your reason for buying? If, for example, you're
buying with an eye to turning a quick profit, some experts suggest
that you have about another five years before the current trend in
rising house prices slows or evens off. As long as house prices are
rising at 15% or more per year, it's possible to make profits of as
much as 100 - 200% of your initial cash investment. A $10,000 down
payment on a $200,000 property has the potential of netting you over
$20,000 profit if the property value rises at 25 - 30%.
It depends as well on the market in which you're buying. In some
markets, notably urban centers on the East and West coasts, real
estate prices and values are rising at astronomical rates. A savvy
investor with a nose for a good deal can conceivably turn a profit in
the high double digits by 'flipping' a piece of real estate - selling
it within several months of buying it.

What about those that say that the real estate bubble is going to
burst and people are going to lose money on their houses? Again, the
answer depends on your intent for buying a house. Even the most
negative of the naysayers agree that housing prices aren't likely to
drop much, if at all. If you're looking for a quick profit in high-
turnover real estate sales, experts suggest that you keep your ear
tuned to the unemployment and interest rates. If they start to rise,
home sales will slow down and prices will either even out or drop. As
long as the interest rates and unemployment rate remain low, it's a
good time to buy a house as a quick turnover investment (flipping
houses).

Buying a home to live

What if you're looking for a home rather than a house? You're still in
luck. Over the short term, there is a chance that home prices will
drop. On the other hand, odds are extremely high that home prices will
be higher in the long term. In other words, real estate will continue
to be what it has always been - a steadily appreciating, long-term
investment. If you plan to buy a house and will be living in the home
for at least five years, it may not matter so much what happens with
home prices now. Home prices could fall as a result of rising interest
rates, but a lower price home might not save you much.

For instance, if you finance the entire $400,000 home with a
traditional 30-year fixed mortgage rate at 6 percent. Then, your
monthly payments would be $2,398. If now, we assume due to rising
interest rate, the home prices fell to $350,000. If you finance
$350,000 at 7 percent, your monthly mortgage payment would be $2,328.
As you can see, it's really not much a difference from today's payment
on a $400,000 home.
It is always a good time to buy a house as long as you know how to
take necessary steps to protect yourself against a downturn in housing
prices. If you've bought a home, experts say, this is the time to put
as much into the paying off the principle of your mortgage as
possible. The more you put into the principle, the higher your equity
in the house when and if you do decide to sell. Never take up crazy
mortgages loans such as adjustable-rate, interest-only, option-
payment ... and other risky mortgage loans that will get you into
trouble should the home prices soften and interest rates rise.

Most importantly, buy the home that suit the type of mortgage you can
afford; do not change your mortgage to suit the home you 'want' to
buy. Most experts do agree on one thing - the longer you own your
house, the more your investment will be worth. If you're buying during
a hot real estate market with prices at all-time highs, they suggest
that you plan to hold the property for at least five years to see a
real profit in it.
Is now a good time to buy a house? The absolute bottom line is, of
course, your own finances. If you're in a position to support a
monthly mortgage, if your credit is good enough to qualify for low
interest rates, and if you expect to live in the house for at least
five years, then you're almost guaranteed a profit when you sell. If
you love the house, and know that you can afford the mortgage - it's a
good time to buy a house, no matter what the market might do.

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