No Need To Rush To Buy

Interest rates are at record lows, housing is more affordable than it has been in nearly a decade and multiple offers are in the air.

Kiplinger.com recently reported the monthly cost of owning a home is far cheaper than renting, given the recent spikes in rent. At current mortgage rates, home prices would have to rise by 35 percent to tip the scales.

It appears the housing recovery is afoot, but that rush-to-buy-before-the-bargains-are-gone mentality may be misplaced.

The slow-growth economy is on hold until after the election and or until after the Euro Zone gets its act together. The Federal Reserve hasn't backed off on keeping benchmark rates low until 2014. And, given labor market uncertainty, your job might not be a sure thing.

It could be a better idea to hold off, make sure your job is solid, save your ducats for a larger down payment, clean up your credit and still get a better deal months, maybe even a year down the road.

Your local market could be the major factor.

"National trends mask pronounced differences across local housing markets," according to the May 2012 Real Estate Trend Data from Realtor.com.

Realtor.com also says inventories are way down, by more than 20 percent, as some buyers are rushing to capitalize on the young recovery.

But that's generating some nasty bidding wars in hot cities. Can you compete?

Kiplinger says taking time to consider when you should buy should include time to consider these factors.

Down payment. Sure you can get a Federal Housing Administration (FHA) loan or other funny money with 3.5 percent down, but those figures that say buying is a better deal than renting are based on putting 20 percent down.

But with less than 20 percent down, don't expect to cash in on record low interest rates and you'll have to pay for ever more expensive mortgage insurance.

Kiplinger says if you don't have the savings or don't plan on staying put for at least five years, fugedaboudit it. Keep saving your money.

Job security. The Euro Zone economy, America's biggest trade partner, remains uncertain. Unemployment here is still above 8 percent and the recovery is one of the most shallow on record. Another recession isn't out of the question.

Are you sure you've got the tenure to keep your job through another recession, should it occur? You've seen what happens to home owners during a recession. Downsizing is a lot easier if you are a renter.

Timing. Will you have to buy miles away from family and friends, just to afford that home? Or will you have to move soon after you buy? Remember, while home ownership comes with some pretty hefty tax breaks and can be a great investment tool, it also can be an anchor. If you are unsatisfied or uncertain about your job, considering a family, or have other plans that work against you being stuck in one place, wait.


Written by Broderick Perkins
June 21, 2012, Published by Realty Times

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