Is Now a Good Time to Buy?

Oct 8, 2010 | Information for Homeowners, Real Estate Investing

Probably the most common question people ask nowadays:  “Is this a good time to buy?”  Buying a home is probably one of the biggest investments you’ll ever make.  It’s the biggest aspect of the “American Dream.”  In these unstable and tumultuous times, making that kind of decision makes it that much harder.  Here’s a short list of the good & bad that every potential home buyer should consider:

THE GOOD:

  • Real estate prices have dropped significantly over the last several years (up to 50% in some areas of the nation) – buying a home at a discount is always a good idea.
  • Interest rates are at historical lows.  During the “Refi Boom” years (2003-2006), getting into a 30 year fixed mortgage of 5.25% was simply unheard of.  Nobody expected rates to reach such low levels, let alone remain at these levels.  This goes to show you that nobody really knows what the market is going to do – today, a qualified borrower can get into a 30 year fixed mortgage for less than 4.000%.  At such low interest rates – I like to call this “free money.”

THE BAD:

  • Many people are anticipating what is being referred to as a “double dip.”  Meaning that real estate prices should go down even further in the upcoming months primarily due to the next wave of foreclosures that are expected to be released by both mortgage banks and government institutions.  When there is an over-supply of foreclosed properties, prices tend to come down.  So you might be over-paying for a home.
  • Qualifying for a home mortgage is much more difficult in today’s market.  Long gone are the days of “Stated Income, Stated Assets.”  You must provide lenders with your tax returns and be able to show a “debt-to-income ratio” of less than 38% (on average) – meaning that your total monthly expenses cannot exceed 38% of your total monthly income.

THE BOTTOM LINE:

It’s all a matter of one’s perspective.  This might seem over-simplistic but if you find a home that you love and feel that it’s priced right, then you should buy.  If you’re a skeptic and feel that prices are due to come down, then maybe you shouldn’t buy.  Potential buyers must realize that real estate and interest rates are usually inverse of one another – meaning that when interest rates rise, prices normally tend to come down (and vice versa).  It’s a double-edged sword that buyers must face when making the decision to buy.  The fact of the matter is that you should do whatever makes sense to you.  A good rule of thumb to follow when it comes to real estate:  Buy when everybody is selling &  Sell when everybody is buying.

<a href="https://eliteequityla.com/our-team/tomer-firouzman/" target="_blank">Tomer Firouzman</a>

Tomer Firouzman

Tomer has extensive hands-on experience in all aspects of Real Estate & Finance. Since graduating from USC Marshall School of Business in 2003, he has been involved in many facets of the industry. Including loan origination, real estate sales & leasing, in-depth analysis of income producing properties and much more. He consistently goes above and beyond for his clients on every transaction he's involved with.

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