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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.

By MSN Money Partner Feb 28, 2012 6:24PM

This post comes from Diana Olick  at partner site CNBC.


CNBC on MSN MoneyNobody 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:

Feb 29, 2012 12:25PM

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.

Feb 29, 2012 1:41AM
I would never buy a house as an investment.  I would buy one to live in the rest of my life, and I'd make it a home that my family would like to inherit and also live in.  If they get it handed to them, who cares how much the house is worth after I die?
Buying and selling houses has become a bit like bulimia for some people I know.  They settle into their "dream home," add weird, trendy features, and then try to sell it as soon as they see their next "dream home" somewhere else.  They always sell at a loss and wonder why they can never get ahead, but they tell everyone about their real estate brilliance.  I don't think spending ten grand every two years on movers, new furniture, countertops, fixtures, and paint is a wise practice, no matter how cute the porch would look with pumpkins on it.
Feb 28, 2012 8:59PM
Stupid and irresponsible reporting. To improve the demand for housing these are MANDATORY: 1. lower unemployment--really, more jobs, not intentionally misleading unemployment figures that exclude permanently un/underemployed); 2. higher wages; 3. controlled inflation, and; 4. deep cuts in government spending--ESPECIALLY support for illegal immigrants and foreign governments. So, bet you pension and future earning when you publish these laughable articles. 
Feb 29, 2012 9:33AM

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.

Feb 28, 2012 9:51PM

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.  

Feb 29, 2012 10:39AM

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.  Smile 

Feb 29, 2012 1:58AM
I am buying foreclosures, fixing and renting them. It's a gamble. If prices go lower, I will be stuck. If the prices go higher, I will make money. I intend to hold for several years before selling, and meantime, I am ok with the rental income. It is a lot of work and property taxes are a drain, so I don't recommend it for everyone. It's risky and I only invested part of my savings in this. It is not for the faint of heart. One reason prices are low is because it is difficult to get a mortgage now.

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 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!" 

Feb 29, 2012 1:30PM

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.

Feb 28, 2012 8:55PM
I don't know how much cheaper housing can get in Nevada.  There at a point of almost "free".  My townhouse is down 33% from the purchase price of 16 years ago and down 70% from the bubble of recent.  Buy now, but there are no jobs in NV.
Feb 28, 2012 10:05PM
People who say there aren't any jobs right now are either not looking hard enough, are not educated enough, or have not made themselves marketable enough.  Everyone must take 100% responsibility for their success or their failure.  If nobody will "give" you a job, start a small business uitizing the job skills you have developed.  Go out and bring some value to your fellow man.  What do you personally have to offer?  Enough with the excuses and the whining; go make it happen for yourself. 
Feb 28, 2012 9:39PM
So how can I buy a house without a job???

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.....

Feb 29, 2012 10:40AM
By the way, to those who are having problems with a lender - keep looking!!!  I don't have the greatest financial background, but I got a mortgage with a small private mortgage company.  Tell the banks where to go and look for private mortgage lenders.  They do exist and will probably work with you.  If one says no - go on to the next - don['t give up!
Feb 29, 2012 4:10AM

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. 

Feb 29, 2012 11:46AM
The person who wrote this article, are you going to buy a new house? are you willing to take the chance that you won't lose your job, or your husband won't lose his job either.  I would like to see you buy a new house and put on the Internet. I see all these Internet stories that are written by people like you that seem to be a lot smarer than everyone else. There's an old saying "People who thing they know what good for someone else don't know what good for themselves" People will know when it's time to buy a new home. They don't need someone from the "Peanut Gallery" to tell when it's a good time.
Feb 28, 2012 10:31PM
I just bought a house 2 months ago in northern California, and I'm glad I didn't wait. Everyone told me to wait until the housing market dropped just a little more, buyers get more desperate to sell during the winter months, that if I waited 2 or 3 years home prices would still be down and I would be able to get a bigger loan. I didn't wait though, and got a fully equipped, upgraded, clean and beautiful house for under 100K, with a low interest fixed rate loan.

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.

Feb 29, 2012 2:23AM
Full Disclosure: if you didn't notice from my screen name, I'm a Realtor.

Real estate is hyper-local....that means that, while one can draw comparisons and even come to some basic conclusions about the value of real estate over any given area (think town, city, county, state, region or entire nation), what's happening in your school district, neighborhood or even subdivision often has a greater impact on local prices than what's happening nationally.  What happens in Michigan doesn't affect what's happening in CA, FL, AZ, NV, NY, etc - that would be a MACRO view.  And while there is nothing wrong with having good information from a macro viewpoint, one should not rely on it to make a local buying OR pricing decision.....IT HAS NO BEARING.

Here's an example from another perspective:  Take a Mercedes SL500 and price it in a major city like San Francisco or New York....then price the same exact car in a smaller market like Fresno or Raleigh or Houston.....I guarantee you that the market value of that car is different in each one of them because prices are based on demand, inventory (and availability of substitutes), local incomes and overall employment climate (demographics), etc.

I could use hyperbole and say that it's a great time to buy a home here in San Diego - and it is for the right reason(s) and for the right people.  But there are areas where it is BETTER to buy than others if you're only looking at the purchase transaction from only a financial perspective.

The reasons I feel it's a good time to buy very likely differ from many others, but a couple things CAN NOT be disputed and they are:  prices are down 30-60% from their pre-bust highs and the uber-low interest rates that are available right now.

Here's a hypothetical example of a purchase of a home with a $300,000 mortgage at 4.25% fixed for 30 years (I've left out taxes and insurance because they differ from region to region). The Principle and Interest payment would be $1476/mo.

Now, you're on the fence (or way on the other side) and think prices are still going to drop and let's say you're right - another 20%.  You buy that same house with a $240,000 mortgage, but interest rates have gone up to 6.25%.  Guess what your Principle and Interest payment is: $1478/mo.


You did "save" $60k though, right?!? If you said YES, you'd be WRONG!  Because assuming the scenario as above (with no refinancing), the $300,000 loan costs you $231,298 in INTEREST over the life of the loan while the $240,000 costs you $291,982 in INTEREST over the life of the loan for a difference of $60,684 - actually $684 MORE for the house that dropped 20% in "value".

Oh, and you rented for the time that you were on the fence.......
Don't believe my numbers??  Feel free to call me at 858.876.4978 or email yourrealtortom@gmail​.com and I'll provide you with the amortization schedule.
Feb 28, 2012 10:38PM
@FedUpWithLiberals729, I don't think you understand the difference between a liberal and a conservative. Holding the individual 100% accountable for their own success or failure in a capitalist society is the foundation of the conservative platform. Davidmallen is saying that exactly. If he was a liberal he would be saying that it's the governments duty morally and financially to make sure we have jobs.

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.

Feb 29, 2012 7:57AM
As a REALTOR for the last 9 years there have been good times to buy and bad times to buy. There were people who should have bought and people who shouldn't have; people who deserved a mortgage and people who didn't. You won't know when it was the BEST time to buy until it's past, but now is a great time to buy-at least in southeast Virginia because dollar compared to dollar, it is cheaper to buy than rent in almost every community. People just need to be able to stay put longer than the past several years. Real estate was never and never will be a quick money maker. Owning gives you more freedom, security and potential return than renting....period.
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