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I live in Chicago and would like to own a home. Should I continue to wait for a couple more years?

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October 14 2010 - Near North
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Profile picture for dacolan
EHurley,

Chicago is obviously a big area, but Near North is down 32.6% y-o-y and 4.5% q-o-q, and appears to continue to be trending down at the moment.

You are spot on in your take on rising interest rates. In a stagnant economy/job market, this would put further downward pressure on house prices.

The most optimistic projections have the residential RE market remaining flat for the foreseeable future. You have very little to lose by being prudent and exercising patience, while you may lose a significant amount buying prematurely. There is no need to rush. Time is on your side.
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October 14 2010
Will the market be a better market than it is now in two years for buyers is really the question that your looking to have answered here and nobody can say for sure.  Speculating on what happens is hit or miss but what I can offer is this question for you to ponder.  If you are currently renting, would owning a home be a better use of your money potentially and could you get equal to or more home for that rent  your giving to your landlord each month?  Another question is based on what you could afford to put down on a home if you purchase.  I think if you are renting currently and are able to save a significant amount of money to put towards a 20% percent down payment in the future that is also wise to avoid PMI - Private Mortage Insurance.  I think whether you wait or buy now, the market is going to be ideal for you.  Best of luck!
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November 01 2010
Based on your comment it seems you want to own. The first step is asking lots of questions of a lender and a Real Estate agent to find out if this is the right time. Take into consideration the tax benefits of owning. All the best.
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October 26 2010
Profile picture for ehurley

To those who responded:

THANK YOU.  Your feedback was very helpful.  Special thanks to "country_hick" and "dacolan".

Good luck to you all.

EHurley

P.S. having problems with e-mail, so I am not able to receive messages at this time.

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October 26 2010
Hello, 

It is a buyers market so I would say that it is generally a good time to buy.  However, everyone has a different situation so it is difficult to say it is a good time for you to buy without knowing your exact circumstances.  Be sure you find an agent that you are comfortable with that can tell what is best in your particular situation.  Feel free to contact me if you would like to discuss this in more detail.  

GOOD LUCK!


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October 15 2010
Profile picture for the_country_hick
I wish you to consider one thing. Every salesman wants to get paid a commission now. As such do not expect any salesman (real estate or otherwise) not to say this is a good time to buy. Yes, a few exceptions exist but most like being paid to well to say wait to buy.
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October 15 2010
Profile picture for the_country_hick
Allow me to dissect some of the nonsense below one piece at a time.

"1 - Lowest Interest rates in history. " 

A $200K MORTGAGE at 4.375% costs $998.57 a month for 30 years.
A $150,100 mortgage at 7% costs $998.62 a month for 30 years.
A $136, 060 mortgage at 8% costs $998.36 a month. 

At 8% a $200k mortgage costs $1,467.53 a month 
At 7% a $200k mortgage costs $1,330.60 a month.
At 4.375% a $200k mortgage costs $998.57 a month.
All numbers based on a 30 year mortgage with no tax, insurance, or PMI added. This is just the cost of borrowing money.

THAT MEANS when rates increase house prices must necessarily decrease to match income levels. No liar loans are allowed now. Having cash you will overpay with such absurdly low interest rates. The only exception would be if incomes also rose greatly. I do not see how that is possible in this economy.

"2 - Low home prices 
(Home prices have dropped across the country the last 4 years)"

Are these realtors forgetting how house prices increased way past inflation since about 1997 or 1998? We have had around 30% inflation since then. Since house prices are still more than 30% above those original pre-bubble prices we are still priced to high.

"3 - Every time you pay your mortgage - it adds into the equity of your home." 

Every time you take the savings from paying rent instead of a more expensive house price, taxes, insurance, and repairs you can come out ahead financially by renting awhile longer.

Interest rates are low. That only props up house prices. When interest rates drop my savings account will come in to buy a much cheaper house. As previously stated, compared to historic house price levels over a century today house prices are still above historic pricing norms.

Look at the blogs below. For more that could be useful look at my profile (place mouse pointer over my name and click) as more are there. You need to do an economic assessment of what is best for you. Do not forget that location is important. Both the cost of gas and proximity to health services could be important later in life.
"Why rent if you could buy for less money? Valid reasons inside."

"Does it make more sense to buy, or to rent? Here is the way to find out for sure."

"10 valid reasons to wait to buy a house."

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October 15 2010
Profile picture for dacolan
"I feel like" ... "more than likely"

Do any of the REAs recommending now is a good time to buy have any hard data to support these feelings and projections?

Beyond that, care to comment on how shadow inventory, unemployment and rising interest rates will effect the residential RE market moving forward?
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October 15 2010
Hi E. Hurley,

By waiting you will more than likely end up buying less house for more money.  Today's market is a buyers market.  You can purchase a bigger/better home for less money.  I won't touch on the interest rates since you mentioned it's not an issue.

But, for most people, with sales prices low, inventory high and interest rates at an all time historical low, it's the perfect storm.

Consider, for example the Irving Park area, homes use to sell for $400k+.  Now you can purchase a home in that area for $200k+. 

In light of the fact that you're retired you may want to consider an income property, like a 2 flat.  Live in one unit and rent the other.  There are some really nice properties at great prices throughout the city.

Feel free to contact me for a free market analysis of whatever area you're considering. 

Good luck! 
714C0D72-7107-AFC4-8A07-53543D194217
1.02.28
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October 15 2010
personally, I feel like property prices are on the way up from last year. Prices are not like they were last year when it felt like the homes were just being sold at throw away prices. Also, there just seems to be lesser inventory and more competition as more buyers are trying to get deals.

You buy when you find a DEAL, whether its 2 weeks from now or 2 years from now, just be ready.
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October 15 2010
Good evening Ehurley,

It is a great time to buy for some.  Having a good agent to give you very individual advice has never been more important.  90% of the inventory on the market will never sell anywhere close to where it is listed, so make sure you align yourself with someone who is looking out for you, not the deal!!!
Check out my website at [link removed by moderator] if you want to see what my clients are saying.
Best,
Ryan Gossett
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October 14 2010
It depends if on how long you are planning to live in that certain residence. If you plan on living there short term, than no, its not a good idea. But from what you have explained, it looks like your looking to live here long term. If thats the case, I would say buy now. Prices havent hit bottom yet, but they are coming close. If your really worries about buying at the best price point, I would say start looking now, and pull the trigger about mid winter. Get a seller when they are desperate. Either way, one things for sure, and that is you should get a good buyers agent to represent you. This way you have someone to walk you through the buying process at no cost to you. Interview two or three agents and go with the one you mesh best with.
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October 14 2010
I live in Chicago and have my house on the market right now, so I am very aware of what's available in my neighborhood.  All I have to say is that I am SO jealous of people who are in a position to buy right now. With the amount of choice you have and deals you can get - it is mind blowing as to what you can get.  I think if you bought today, and plan to be there awhile, you'll be very happy you bought. 
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October 14 2010
Profile picture for ehurley
Thanks for responding.  It is important to add that I don't need a mortgage, so interest rates are not relevant unless they cause additional downward pressure on prices.  This is because added costs (in the form of interest payments) will leave most buyers with larger monthly payments, thus reducing their purchasing power. 

Also, I'm not concerned about my employment (due to early retirement).  

It sounds like those who have responded expect the market to go up from here. 

Rgds.
EHurley
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October 14 2010
It depends. Can you get a mortgage and afford they type of property you want? Do you plan to keep what you buy for 5+ years? If not then maybe you should rent.
Do you think prices will go down even more during the next 2 years? I doubt that they will, but they might not go up very fast if at all which is why I asked how long you plan to keep what you buy.
Eventually interest rates will start to go up which means you will pay more for whatever you buy so unless you think prices will go down and interest rates will stay down perhaps now is a good time to buy.
A lot will depend on what you want, where it's located, can you get a loan and can you find something you like.
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October 14 2010
Not at all. It's a Buyer's market. There are great deals out there for most types of homes in a bevy of different areas. The best and first thing to do is get pre approved. Once you've done that, connect with a real estate professional that can best manage your needs and expectations. Let me know if I can help in any way.
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October 14 2010
If you've got good credit, a stable job & some down payment money, now is a great time to buy.  I can't imagine that the ~4% interest rates will still be around in a couple of years...

Laurie Christofano, Realtor, Buyer Specialist, SFR (Short Sale & Foreclosure Resource Specialist)
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October 14 2010
 
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