Finally, time to buy a house?
Look past national headlines about the continuing decline of housing prices and focus on your local market. It's likely recovering nicely already.
Nobody wants to catch a falling knife. It is as simple as that. If potential buyers see continued home price erosion, they will stay parked on the sidelines. But as with everything else in this unique and historic housing market, perhaps the usual logic doesn't apply.
“Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, 'What should I do, Mr. Trump?' I say go buy a house," said Donald Trumpearlier today on CNBC. (Post continues below.)
"It wouldn't be an obvious mistake to buy a house now," hedged Robert Shiller, barely a few hours later.
Perhaps they were just jumping off Warren Buffett's declaration Mondaythat if he had a way to manage them, he would buy a couple hundred thousand single-family homes and rent them out.
Housing appears to be rated a "buy" these days, especially among investors, who see a ripe and rising rental market and big potential for income. But is it the right time yet for what I call "organic" buyers to get in? By this I mean people buying a home to actually live in it, raising a family there and letting the dog run around in the backyard. If prices are still falling, couldn't an even better deal be waiting down the road a bit?
No. House prices will continue to fall on a national basis at least through 2012, but you have to look past national headlines to your local market, which is likely recovering nicely already. The trouble with the national numbers is that they are heavily weighted toward the lower end of the market and its distressed end.
About 73% of homes that sold in January were priced below $250,000, according to the National Association of Realtors. Forty-seven percent of homes sold that same month were considered "distressed," which is either a foreclosure or a short sale (where the lender allows the borrower to sell for less than the value of the mortgage). With all the activity in these areas, no surprise that prices skew lower.
The $250,000 to $500,000 price range may now be the sweet spot for the market. Sales in January were up in this price range, and if you have good credit, you are within GSE (government-sponsored enterprise) and Federal Housing Administration loan limits in most markets. While the FHA just raised its insurance premiums, which may hurt much-needed first-time homebuyer demand, it is still one of the best loan products out there today, especially for those with lower down payments.
You cannot time housing any more than you can time the stock market. True, housing moves far more slowly, but that works to its benefit, as prices don't rise and fall on daily news or even on major events. Sales have clearly bottomed out in housing, and prices always lag sales. They will lag longer this time around, no question, but they will come back. Supply and demand will eventually win out, even after a historic crash. If you can't get a good mortgage now, then perhaps it's not your time, but if you can, waiting may not buy you much.
More on CNBC and MSN Money:
I notice a lot of "Thumbs Down" given to some very intelligent conversations about being cautious and careful, possibly even waiting to purchase a home yet...makes me wonder???
I've been a real estate investor for 10 years, even a Principal Broker with my own company, I cost myself a lot of money telling people to still be VERY careful, but it is the right thing to do. Here is my litmus test for ownership:
1) You are very confident about your income for at least 5 years
2) You are very confident you will not have to sell the house within 5 years
3) Have all your debts under control with reliable transportation
4) Keep a mortgage within a very reasonable percentage of your income - No more than 50% of your NET income - if you're a low income earner that will exceed that percentage, then why buy a house with that type of risk - put the money into your education and income improvement NOT a house!
5) Have ALL of your necessary insurances in place and have at least 3 months (preferably 6 months) of savings in the bank to cover ALL bills
If you can meet these criteria, and even other personal desires such as retirement savings, etc., then you are a candidate to purchase. If not, then you are probably taking excessive and unnecessary risk just to say you own a home. The best time to buy a house is always, when YOU are ready, not when everyone else is telling you to do so. Investors operate with different levels of cash and goals for buying, those should not translate to the individual owner-occupied purchaser.
Beware of houses that are "fixer uppers" It is easy to mask problems by putting in wood floors and a new door and paint.
Have it thoroughly inspected.
Didn't Buffet just take a big investment stake in Bank of America which has a huge and growing inventory of foreclosed homes that it needs to sell?
Isn't Donald Trump a real estate developer who makes money when sales and prices go up?
Isn't Shiller the guy who has called the housing bottom wrong about nine quarters in a row and desperately needs help from buyers to prove him right for a change?
Be careful which experts you take your advice from. They may have a vested interest in your actions.
My fiance & I started looking at houses in May 2011. (We're in our upper 20's, my credit over 740 his over 720.) We were first pre-qualified by Chase at 4.75% APR. Put offers on two houses, one a short sale never heard back on after about 2 months, the other offer went dead after the seller took the first offer they were given. November 2011 we put an offer on a third house. Seller went w/ the offer. Got re-prequalifed by Wells Fargo w/ 3.75% APR!! Between May & November some prices went down, while others were already going back up. The house we ended up buying for $180,000 (listed at $210,000 after going down from $234,000) w/ and FHA loan at 3.75% APR, with 4% down was a GREAT DEAL! A 2,100 sq/ft bi-level w/ just under a half acre property. The only downfall of the 3.75 APR is that we won't be refinancing for a lower rate anytime soon! But that's ok! Other people are refinancing for what we are paying!
In my experience, getting qualified was a breeze and the whole process after that was a breeze... An no... I don't drive a Prius, but do have a steady job.
1.) Every freakin' month for six years the media "experts" have been saying "Now is the time to buy!" They have now thoroughly established themselves as the LEAST reliable source of advice regarding when to buy real estate.
2.) The National Association of Realtors(the NRA) just got caught LYING about real estate sales statistics on September 12th, 2011(look it up on msn.com real estate articles). For over three years they've been over-stating national sales figures by fifty percent. FIFTY percent! They tried to tap-dance around and give some lame excuse for their "minor error", and then quietly re-adjusted their figures by about ten percent. They have thoroughly established themselves as an unreliable, biased and dishonest source of information.
3.) Donald Trump? They quote a man who makes money sellling real estate? Prices go up, he makes more money. NOT an unbiased source of real estate advice.
4.) Robert Shiller has been saying prices have bottomed out for the past two and a half years. He has thoroughly proven himself to be clueless and useless as a source of real estate advice. He is either an idiot or he has heavily invested in real estate.
5.) The article indicates that we should ignore the low prices because the large number of foreclosures is skewing the price statistics. Well duh! And there are plenty more foreclosures coming, so the statistics will skew even lower. Why exactly should we ignore that?
Every month for the next couple of years the media will continue to put out numerous articles telling us, "Okay everbody, NOW is the time to buy! We know we said this before but we really mean it this time!"
Do the number. I just bought a 3 bedroom condo in southern California for $138,000, my total payment is $950 includes the association fee, and the same condo in the complex is rented for $1,650 per month.
1. I don't care if the value drop another 20 or 30 percent, it'll come back.
2. Who cares if I lose my job? I still need a place to live and my payment is cheaper than the rent.
3. Job relocation? I can rent out the place and gives me $700/mo positive. No kidding.
4. my payment is fixed for 30 years and eventually I'll pay off my mortgage, instead of paying $1,650 to the landlord and worrying about 3% annual rent increase.
If you are able to obtain a mortgage and it makes sense to you. Go house shopping.
BUYERS BEWARE: If you plan on moving to Florida and picking up a foreclosed/cheap house,,,DON"T Unless you not only have it inspected,,but get what is called a certified mold inspector I did not know the were ever an item.. i bought a 4 br 2 bath house. It was 20 gees under market value..Good deal right? NOT! 8 days after I move in i was rushed to the hospital via ambulance.I could not breath. It was after my second abulance ride 3 weeks later that I had the air quality in the house checked,via Doctor. You guess it mold through out..
Florida has many such houses for sale so be careful please. I am getting better after a year and a half But will not ever be the same. I had to walk away from that house and let the bank have it back.....
I might possibly believe things are getting better if this was not an election year, but it is an election year. All of this talk of things getting better is politically based and the numbers are being manipulated to make it seem that way, but things are not better.
Right after I closed on my house I saw prices start to climb again, and quickly. Buying a house in my area for under 200K was completely unheard of 4 years ago. My county's housing market crashed, but it was less extreme and much shorter than that of the rest of the state and country.
The question shouldn't be "is now the time for everyone to be buying" the question should be "Is now the right time for me to buy in my specific housing market?" of course that's after the preemptive, "Is my career stable enough for me to buy right now?". In order for the housing market to pick back up people need to be investing in it, but if all of our buyers are working for companies and industries that are failing it will only make things worse. We need more than just buyers, we need buyers whose careers are stable enough to back up that investment.
For me the deciding factor was that even with all of the extra utilities, taxes, insurance and what have you, it was still cheaper for me to own a 2 bed 2 bath single family house than to rent a 400 square foot studio apartment.
Obviously it's too soon to tell if my investment was a good one, but what I do know, as of right now is that I'm now living in the biggest, nicest, least expensive place I've ever lived in, and when I write that check (or rather approve that online transaction) every month I feel like I'm investing in my own assets instead of someone else's. and if something crazy happens and I need to replace a heater or redo electrical work, I am able to save enough money to be prepared for that.
find your window, then invest.
While I don't identify as a liberal or conservative, I agree with Davidmallen. in order to be employed you have to be employable, and that's our responsibility and no one else's.
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