To Buy Or Not To Buy? That Is The Question

Feb 20, 2008 - 10:55 AM PST

As a Realtor for nine years the most common question I get is: Gina, is this a good time to buy. The answer is…drum roll please…it depends. It depends on the situation.
Owning a home can have some great benefits. For example, you’re not subject to rising rents and the payments you put towards your home go towards your investments, not someone else’s. You can benefit from getting equity in your home not just from a rising real estate market, but also paying your loan balance down. Then you can put that money down on your next house or real estate investment; or, if you live in the home long enough or pay off your loan quickly, you will eventually have no loan payments. Not to mention the tax write off can really help you when it’s that time of year and you have to deal with Uncle Sam. If it’s your own personal home you can afford the payment without causing yourself financial stress. If you plan on living there a while, the answer doesn’t matter long term. Even if you bought at the peak and you neighbor ends up selling for half of what you paid, you could always buy your neighbors house and wait for the tide of equity to flow back in to your investment. The real estate values can go up and down, but over time the value will exceed its old high. For example, you will never buy a home in California for $5000 again.

Is it always a good time to buy? My answer is no. Here are some factors you need to consider. How much will your payments be vs. the cost of renting the same quality house? For example, there are areas in California where if you bought the house your mortgage payment would be at least twice what you could rent it for. There isn’t a tax write off that would justify me paying double for the same lifestyle. It might be worth the cost in an appreciating market, since your net worth is going up while you’re breathing. However, that reason alone may not be enough if you have to stretch your money to a point where you have no money to save. The market is subject to change and your equity can disappear while you’re breathing as well. If your house payment is reasonable to you, make sure you know if the payment will remain reasonable. There are loans that offer 2,3 or 5 years fixed. Some are interest only as well for a few years, after that your payment can go up and you could find that your American Dream is turning into an American Nightmare.

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