Is now the time to buy a house? This is probably one of the most asked questions concerning the current housing market. With spring in the air and summer on the horizon, many people are considering whether now is the right time for them to purchase a home. After the collapse of the housing market, home ownership, for many, may seem too risky. Despite this, one cannot dispute that there are great opportunity in a down market. Before you make a decision on whether to keep renting or start your home search, there are a few questions you need to ask yourself.
1.) Why do you want to buy? Buying a house is an enormous investment so why do you think you want to? Are you looking to buy a house because a friend told you it would be a great investment? Or have you found a home that you want to start a family in? If you’re looking to buy a home with the sole purpose to resell it five years later for a profit, you may find yourself dissatisfied with the result. The market will take time to recover. At this point, it would be more ideal to find a home you truly love. You’ll never regret your purchase, even if the market takes another dip.
2.) What is your financial situation? It is difficult to purchase a home without a sizable down payment in the current market. By dropping a 20% down payment into a house, many people can find themselves “house poor” if they didn’t take an honest look at their finances before meeting with the bank. The other thing to consider is that with 20% down, you avoid paying PMI. The larger the down payment, the smaller your monthly payment and the more equity you start with in your home. While it may be tempting to purchase a home when interest rates are at a historic low, it’s only a good idea if you can truly afford to do so. Be honest with yourself and take into account your bank balance before you start looking at open houses.
3.) Where will you be five years down the road? One factor that many people disregard when purchasing a home is how it will affect them in the long term. It may seem to make sense now, with prices and interest rates being so low, but if you’re a student or your work occasionally relocates you, does that house become an asset or a liability? Similarly, if you’re a new couple starting out, how much house will you need? You may fall in love with a small two bedroom one bath home. But in the long term is your plan to have a family and children? Always keep in mind what direction you’re heading and it will help you decide if a house will make sense for you.
Buying a home should be a personal decision, not a market decision. Obviously the market will have an influence and either help or hinder the process. However, in the end, buying a house is an emotional and personal decision that will require time and investment. Only you can determine if now is the right time for you to buy a house.