When IS the right time to buy? (a house...that is)

[Aloros]

Like many of the lovely PSers out there, bf and I are house-shopping. We’re not in the biggest rush (although bf says no dog until we have our very own place!), but we’re browsing for bargains at the moment, and watching prices.

The area we’d like to buy in is very expensive. Most of the stuff is vastly out of our price range. However, the neighborhood is lovely, it’s close to work, very safe, and the schools are top-notch.

I recently found a 4bd/2ba in the neighborhood in our price range. It’s bank-owned, and I know we could talk them down even further, with the way the market seems to be going. It could use a little updating (built in the 80s), but everything is in very good condition (on a superficial inspection) for a bank-owned home. The carpets don’t even need replacing! It’s on a quiet street and has a nice, big backyard.

I called my brother, and he told me that I shouldn’t even be looking right now. He says house prices are bound to drop further. He also said some other, not-so-nice things, but he’s a rather opinionated person.

Is he right? We don’t NEED to buy right now. We had a timeline of buying in the winter, since prices tend to go down, but we’re flexible. I’ll admit I’m a little anxious since the stuff in this neighborhood is either a) vastly out of our price range – by at least 50k, though most houses tend to be 100k or more out of our price range or b) on a busy street, is a half-plex, or is tiny. I haven’t seen anything else that remotely meets our requirements. We were beginning to think we''d have to take a hit on the schools and look elsewhere.

I know, as my dad says, no one rings a bell at the bottom, but should I just cool my heels for a while? It would give me time to save for a bigger downpayment – we can put down a little over 10% right now.

Thanks in advance to all you experienced home-owners!

 

[sumbride]

Well, prices will either go up or down... but with the current economy, I don''t see them rising quickly any time soon. I''d be patient and wait until you find JUST what you want because depending on the economy, you might be in it a LONG time. Make sure it''s big enough for your future plans and be sure to have a full inspection.

Houses do tend to sell a little slower in winter, but on the other hand, people that are planning to put their house on the market often wait until spring so if you don''t find the perfect house, wait it out.

also, there will probably be many more bank-owned houses available as the mortgage crisis builds.

 

[janinegirly]

i typed up response and got an error message which erased it...grr (happen to anyone else?)

anyway, it depends what you''re trying to be "right" on. If you''re trying to time an investment, then maybe you should wait. Although it''s all speculation and no one really knows.

but if you''re trying to buy a home and timing is right for you, then the right time is when you find the perfect home within your budget (and if you have the savings and a cushion to put down a decent downpayment). If the market is on a downturn, that''s a bonus. You can''t let the market dictate your life, but having things on the downswing doesn''t hurt either.

 

[laine]

The market really depends on where exactly you are. Where my parents live in MD, the housing market is stalled and prices are dropping, yet where I live in PA, plenty are being built and sold. Prices aren't going up drastically, but they aren't going down. Unless your brother happens to be an expert in the real estate market in your area, I would ignore him and talk to someone who is. Are you working with a real estate agent? Maybe even talk to some agents that aren't representing you but are familiar with that neighborhood.

If most of the neighborhood is way out of your price range, but this house is in your price range, it may be worth considering. Just make sure you get a good inspection to confirm that there is nothing hidden that accounts for the low price!

 

[TravelingGal]

I''ve been watching the market here in socal for a year and a half now, reading tons of blogs and checking listings nearly every day.

NARS is really full of sh*t (no offense to any realtors out there). About a year ago, they put out newspaper ads saying why it''s a great time to buy. Of course, in the last year they''ve had to lower their forecasts again and again. I have seen the so-so areas around my house drop 10% in the last year, and the nicer areas drop about 5%. Now, in an area where homes are in the 6-7K+ range, that is a lot...plus with every passing year we add about 25K to the downpayment fund.

That being said, no one can predict the bottom of the market (which I can pretty confidently say is not now). However, the best time to buy is when you can afford it and get a price and loan you are comfortable with. I personally am not comfortable with either of those two things right now so I will not buy. If the market were to rise tomorrow, it would not be a big deal for me because I am realistically priced out right now. I won''t be saying, darn, I should have bought in 2007 when I could have not afforded it a little better.

If you are looking to stay put for awhile, you can probably ride out this wave. If you are thinking of selling in the next 5 years...I''d probably bet that you will lose money.

 

[Tacori E-ring]

We buy a lot of bank owned homes. If it is on the MLS you can''t talk them down that much (I am talking about a HUGE discount) but you should offer lower. We got $16,000 plus closing costs off our first home (MLS bank owned). You will get a better discount buying through the courthouse (not the MLS). If you LOVE the house NOW is the right time. Prices are always going up and down. You can''t hold out forever. It is rare to get one in such good condition so I would go for it.

 

[Allisonfaye]

I am betting that your brother watches Mad Money. That guy is very anti-buy a home right now. I think it is very difficult to know when you are hitting bottom. A lot of it is just plain luck or bad luck in some cases.

My opinion is, it is better than it was a year ago. If it is a good opportunity for you, then go for it. But I think a very important factor in your decision process should be how long you intend to live in it. If it is for a short time, I say wait. You might not recoup your costs and you could experience a further decline in market value. Unfortunately, those bank owned properties become comps and they bring the market down.

But if you want to live there for 5 or more years, I think you will be fine. I do think interest rates might come down a bit further but that is just my opinion. I think opinions on when to invest are like parts of our anatomy. Every one has one.

 

[pennquaker09]

I think I would lean towards purchasing the home if it is something that you definitely love. From what you said, it sounds like it''s in a good area and the prices probably won''t change all that much. The only thing is that I personally think it''s better to put more than 10% down.

 

[moremoremore]

It is definitely a buyers' market....If you love it, buy it. Bc someone else will. An approach might be to haggle on the price and see if they bite....I don't think that if you wait, they will be giving houses out for free It is a good time to buy...so I'd take advantage of it and stop worrying about if you can or can't get a better deal depending on how some predict the market in the future...I also personally think it is very difficult to buy at the courthouse steps....at least here in NY...speculators are there and make deals between themselves...and there are title issues and issues regarding times to close...I also don't think 10% is the end of the world....save your money after you buy and make prepayments (make sure you can) and then put an end to PMI....It all boils down to how much you love this house and how long you want to be there...

 

[movie zombie]

the mortgage crisis should hit a peak in 2008 or at the end of that year as those ARM''s take a further toll on the economy. the really great deals to be had will be then. never ever think you just have to have a specific house: falling in love with a house is a mistake. why? buyers are apt to overlook something important that will come back to bit them. no one house is the house: there are many. they will all have different positives and negatives, but there is more than one house that will be perfect for you. take your time. add to your savings. if a right house for a right price crosses your path, then buy it. much depends though on what part of the country you''re in and what price range you''re looking at. the real bargains will be in the upper end of the market...... good luck! and congratulations for saving for your home.



movie zombie

 

[justageek]

The mortgage crisis will probably peak next year or early next next year, but its effects will be felt for years to come, IMHO. If you''re planning on financing most of your purchase, I''d recommend waiting a few weeks (Fed will probably lower interest rate then) and then getting a good loan with a FIRM interest rate. Legislation will be passed soon that will probably make banks less willing to give good loans out, and you don''t want to get stuck in that backlash. There''s not too much price variability in the wealthy, more established neighborhoods, so the price on this bank home isn''t likely to go down much further. If you can afford it, get it. Real estate is generally much safer as a long-term investment and not a quick flip, and if you can afford it for the long term, you should get it.

 

[Aloros]

Thanks for all the advice! I do notice that this neighborhood is not dropping as much as everywhere else, though prices are still continuing to go down. It''s tempting to move to a newer neighborhood (BIG houses for so much less money!), but the schools are brand new and are an unknown factor.

We''ve decided to wait a week and think it over before taking any further action.

There''s a chance both of us will have a windfall of money in the next year or so (both of us do some work on the side), and it would be nice to apply that to the downpayment. I''ve been thinking about that too, though there''s no guarantee that things will pan out.

We''re planning on staying put for a while.

 

[movie zombie]

if you can save enough to put down 20% and pay closing costs, you''ll save $ in the long run as you won''t have to pay PMI.

movie zombie

 

[fisherofmengirly]

What is PMI?

 

[KimberlyH]

Date: 12/13/2007 10:33:49 PM
Author: fisherofmengirly
What is PMI?

PMI=private mortgage insurance. People who put down less than 20% of the value of the home they purchase are typically required to purchase PMI. Once they have more than 20% equity in their home they can drop the insurance.

ETA: It is typically up to the PMI client to track payments until the time comes when they are 20% or more vested in their homes, and prove it to the insurer so they can drop insurance.

 

[movie zombie]

PMI also is not tax deductible.........and does not go towarads your principle. as an insurance, it does nothing for you, but does protect the lender. it will reduce your payment by more than you would think if you don''t have to pay it. and that is $ you can use towards paying down your principle.

movie zombie

 

[dani13]

The reality is that most people are not able to put down 20% these days, especially first-time homebuyers.....If you purchase even a $300,000 home, that means you have $60,000 in liquid assets to put towards down payment, plus another 8-10K (approximately) to put towards closing costs, which for many first timers is just unrealisitc.

For those looking to buy, check out the different mortgage programs your lender provides. When it comes to PMI, there are several options, such as paying the PMI outright, and other options such as taking out a 2nd (piggyback) loan to cover the 20% down payment, etc. If you go with the piggyback loan option, the interest on that loan is tax deductible. So, this is definitely something you may want to consider vs. just paying the PMI outright, which is just simply writing a check to the bank and getting nothing in return....

Bottom line is work with a good lender who is really on your side....someone who is patient and will explain all of the available options for mortgage programs that are out there.

 

[fisherofmengirly]

We spoke with our realtor and mortgage contact about this, because we definitely are not putting 20% into our new home, not at this point.

There are a lot of options, and with first time home owners, there are even more options. Paul and I don''t qualify for some of them, because of some of the requirements (income caps and the like).

One important thing to think about and take into consideration is that while there may be PMI in place until the home is 20% paid for, you always have the option of paying extra each month toward the mortgage (which is an EXCELLENT idea, as it allows you to pay for your home in less time), and that is off the principal, not the interest. Another thing to think about is that while you''re paying rent, that money is going *no where* to help you toward building equity or to help toward assets.

To us, now is the best time. The market rocks right now, and if you find a home you can be comfortable in for at least 5 years or so, it''s most likely that with the rates where they are right now, it will be a good deal when the time comes (if the time comes) to sell and move to another home.

Interest rates being in the 5%s now is awesome, and is something that will really effect the actual cost of the home, so even if you can''t do the 20% down payment, a home purchase could be a really great move financially at this point.

We''ve talked to a lot of people about this, and as long as a person (or couple) is able to think responsibly and purchase a home they can afford (especially if you can afford to pay more than the actual mortgage payment each month), it seems to be a consensus that now is a WONDERFUL time to buy.

Of course, a lot also depends on where you live. Some areas are projected to dip in average prices, and others (a lot of areas, actually) have leveled off.