Is now a good time to buy a home?

No one knows for sure where or when the market bottom is or when interest rates will increase. Multibillionare John Paulson in Forbes Magazine said:

As this is the best time in 50 years to buy homes, Paulson advised his listeners, crowded into 3 separate dining rooms, to issue 30 year mortgages to buy a home as "your debt and interest payments get locked in at record lows, while the price of your home will rise."

"If you don't own a home buy one," Paulson recommended; " if you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home."

click here for the complete article

  • December 01 2010 - Cincinnati
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Answers (34)

Profile picture for blank screen EXILED
Until the economy shifts from being "consumer driven" to "innovation driven", and until the economy, governments and households shift from deficit spending to savings reserve oriented with "pay as you go", and until general sales are shifted from advertisement marketing driven to customized individualized searches, most of the people will continue to make stupid decisions and economic mistakes, especially the government of elected officials that have less than 4 years of "accountability".

Our present economic system is not a "free market", but a "propaganda market" with government interference to artificially raise prices and increase the sending of resources to landfills.
  • December 06 2010
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Profile picture for SteadyState
I do not know what is more scary:
1. That REA's blindly spout the NAR's talking point (these are supposed to be "professional representation" for buyers and sellers) without understanding the local situation, buyer/seller situation, economic situation, etc.
OR
2. That there is such a large fraction of the population that is gullible enough to fall for the talking points and who do not take the time to perform independent research and analysis of the economy and market

I convinced myself that only voters are naive. I guess I have to revise my beliefs about home buyers (consumers) now.
  • December 06 2010
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Buying a home is an emotional decision--when you find the house you fall in love with.

Buying a home also needs to be a business decision--before you start looking. How? What are you paying for rent now? You're basically paying someone else's mortgage with nothing to show for it at the end of the month or the year except the cancelled checks.

Talk to a lender to find out if what you would have to pay for a mortgage would actually be LESS than what you are spending in rent. Many times it is, AND at the present time, you can deduct the interest on your loan (most of what you pay the first five years is interest) as well as any property taxes you incur. This means you may actually be able to live the equivalent of "rent free" for several months of the year when you figure the taxes you save after becoming a home owner.

To learn what is available, contact an active realtor (one who has more than a handful of listings) in our local area. That person will not only know the different neighborhoods most likely to fit your needs, but will able to be able to tell you of really great buys currently on the market or likely to come on the market soon. Nothing's better than knowledge when making a decision to buy a home in a great buyer's market, such as we have now.

You don't have to be house-poor to own a home AND the currently very low interest rates have been seen since the 1950's!  Affordability is based on what your monthly mortgage payment will be.  And they have--since the mid-70's--been lower in November, December, and January than in other months of the year.
  • December 06 2010
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Profile picture for Connie Klemme
I'm sure it varies in every market but it's a great time to buy here, interest rates are still low and there is a good balance of homes to choose from.  Our local economy is stable and the job market is good.  Lenders aren't writing those crazy risky loans like they had been doing.    I've had a busy month already with buyers looking...I'd say if you are ready to move, get after it while the rates are low.  If you are looking to seel get after while buyers are excited about the rates!
  • December 06 2010
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Profile picture for the_country_hick
I saw one house for sale that would probably be a good buy now. It is unfinished and has more money in the wood of the house than it could be bought for. It also has a bunch of land with it.

The problem is its location. It is in a small town far from where most would want to be. Does a population under 1,000 that declined by 4.3% say anything?

The other problem is that although it has a good amount of land that land is almost unusable. Almost all mountain slope.

The final problem is that to finish the house would about double what it would cost to buy. I remember the old saying, never be the biggest house in an area. This would be close to the biggest. Overspend, overimprove, underperform, and financially you could be in trouble.
  • December 06 2010
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Is there ever a good time to buy if you can't afford it?  I don't believe you can ask such a general question to so many individuals, and I don't mean that as a blow to Jim for asking this question.  It just seems to me that a lot of people ask this general question and think the answer applies to everyone.  Are rates and home prices low?  Yes.  Can you buy a Ferrari for less than you could 5 years ago?  Yes.  So does that mean I should go buy a Ferrari?  No.  Too many people are relying on others to give them the answer when really they should be looking for education so they can form their own educated answer.  This could be the best or worse time to buy, it all depends on the individual. 
  • December 06 2010
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GREAT ARTICAL
  • December 06 2010
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Now is the best time to buy a home, interest rates are low and there are lots of homes on the market to choose from.
  • December 02 2010
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Profile picture for the_country_hick
A few years ago I could have bought a house (and lost it).

I went to a local bank. I asked them about getting a mortgage. They offered me a mortgage for all but $300, maybe $400 a month of my income.

I have some extravagant expenses that I wanted to continue to spend money on. Big ticket items that really cost a lot of money. Eating food, Car insurance, Buying very old cars and running them into the junkyard to mention some. Keeping the place I live in warm in the winter and having lights on inside are some others. Then there was the thought about paying property taxes and insurance.

As I looked at my exceptionally extravagant spending lifestyle I was not 100% positive but had an excellent idea that if I used any gas or needed any tires or wanted to order a pizza I did not have enough money after buying a house to live in.

For me being told I could spend far more money on a house than I KNEW I could afford was the point I stopped wanting to buy (now). It showed me that something (I had no idea what at that time) was very wrong in real estate. That financial disclosure by the bank was a exceptionally strong warning sign for me. It said stop here, do not pass go; do not go swimming as strong undertows and sharks are out there.

I kept saving for a house. I now have a very nice nest egg. As long as realtors keep spouting NAR nonsense and ignore the facts it has the same effect on me that the bank did. It makes me NOT want to buy (now).

I am not "lucky" to be able to buy now. I paid a hard price for over a decade to be in this position. I sacrificed today for the house I was sure I would be able to get tomorrow. Even as house prices rose so much it seemed they would never be affordable I saved more and more. Now as prices are falling more and more why should I hurry?

Luck or planning with persistence? I did not get lucky and win a lottery or inherit a large sum from a long lost relative I never knew. I sacrificed to get where I am now. I refuse to surrender what I have saved by sacrificing just to buy a house before it makes sense.
  • December 02 2010
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Profile picture for blank screen EXILED
Doesn't any Realtor® read?

"Can't go wrong"?   Isn't that what they were saying in 2003 and 2004?

If you buy with 5% down and 3.9% 30 year fixed interest rate, when the rates go to 6% and the values drop another 10%, and you need to get a loan for any reason, or refinance for any reason, or move for any reason, WHAT are you going to do?  Really, Really, Really, WHAT are you going to do?  Have you not thought about this at all?

Go ahead, buy another home, and let the lender foreclose on it.  As you said, you can't go wrong if your circumstances change and you end up in bankruptcy.  You can get another bankruptcy every 7 years; the lenders and government are happy to bail you out.  And there are plenty of "soup kitchens" and "food stamps" so that you can live under a freeway bridge until you fix the problems you create for yourself.
  • December 02 2010
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Profile picture for blank screen EXILED
I agree with you Dacolan!  Luck had nothing to do with it; it was simply reasonable planning, watching market factors, and not being duped by misleading sales pitches & get-rich quick books from people that made their money selling get rich quick books instead of using the methods promoted.

Of course I am in a position to be able to purchase now; 800+ middle FICO score, easy to document income, minimal expenses, no debt, reasonable savings...  but why should I increase my property taxes, increase the interest rate, decrease the amount of space, increase my living expenses, increase my maintenance costs, increase my debt, move to a less desirable area, and borrow in such a way that the loan will be upside down in less than 2 years?  That is what got people in trouble in the first place!

Why do I get the distinct impression that the poster prior to dacolan didn't read any of the prior posts?

Confidence?  Yes, that is what caused most of the present foreclosures and short sales.... millions and millions worth.  Luck had nothing to do with it.  Believing in Norman Vincent Peale Philosophy is what caused a lot of people's so called "bad luck".

Why don't people put confidence in Math and logic instead?

All I can't think of with the statement about confidence is the song from "The Sound of Music", and what happens right afterward.

Wishful thinking never accomplished anything, and it is the exact opposite of what the Bible refers to as "Faith".
  • December 02 2010
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Profile picture for Remaxjenn
It is a great time to buy a home in Central Florida! Prices are affordable and interest rates are at an all time low. You can't go wrong in this market!
  • December 02 2010
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Profile picture for dacolan
If you are in a position to be able to purchase a home now, count yourself among the lucky. ...

Keep in mind, on an average $200,000 home, for every 1% more the interest rate is, your purchasing ability decreases about $20,000. This means, if you are waiting for another  10% decrease in the market (your $200,000 home to be for sale for $180,000) and the interest rates creeps up to 5.5% while you wait (still extremely low!), then you have waited for nothing as your payment will remain the same, you will just be paying more in interest.


If a 1% rise in rates results in a 10% drop in home value, your payments may be the same in either case per your example, but circumstances are very different. Which buyer would be hurt more if forced to sell for some unforeseen reason; the one who bought for $200K, or the one who bought for $180K? Say they don't sell for 20+ years. Which buyer will be better off? Let's face it, interest rates realistically have only one way to go from here.

If a consumer is still in position to buy today it is likely not due to luck. I think RE pros will find today's buyer is much more sophisticated overall than those that bought during the bubble. Not only do they have the means to document their better overall credit, income, savings, etc, but they are likely far better informed following the recent housing market meltdown.

The days of the oversimplified sales pitches/NAR talking points REAs have come to rely on are coming to an end. 'Historically low rates,' 'high inventory,' 'depressed prices' (when compared to bubble peaks), 'no one has a crystal ball,' etc. ... none of these are rational economic reasons to buy now.
  • December 02 2010
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Profile picture for JenKOwen
Is now a good time to buy a home?

If you are in a position to be able to purchase a home now, count yourself among the lucky. The timing for a purchase probably could not be better  than it currently is.  With housing prices reduced in most areas of the country, and interest rates at an all time low, the affordability of housing will likely not get better, even if we have not quite reached the bottom of the housing market yet. 

Keep in mind, on an average $200,000 home, for every 1% more the interest rate is, your purchasing ability decreases about $20,000. This means, if you are waiting for another  10% decrease in the market (your $200,000 home to be for sale for $180,000) and the interest rates creeps up to 5.5% while you wait (still extremely low!), then you have waited for nothing as your payment will remain the same, you will just be paying more in interest.

Get out with your local realtor, look at the market, talk to your banker. Buy your dream home today and be confident in your choice!
  • December 02 2010
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Profile picture for dacolan
With interest rates at near historic lows and inventory at an all time high, there's no better time than the present to purchase.

Historically low rates, high inventory, depressed prices (when compared to bubble peaks), there is no "crystal ball" to catch the bottom and time the market, etc. ... none of these are rational economic reasons to buy now.

Based on the first four responses to this thread the RE pros are doing their best to put lipstick on this pig, but until they're more candid about the true economic reality and risk the current housing market presents, the less merit their advice will be given and the longer it will take to rebuild their credibility with consumers.
  • December 02 2010
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Long story short, yes, it is good time to buy.
Pending home sales jumped 10.4% in October 2010.
http://www.msnbc.msn.com/id/40469517/ns/business-us_business/

  • December 02 2010
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Profile picture for dacolan
it is impossible to time the bottom of the market. 

And unnecessary. Buying a house that has already started appreciating in a market that has stabilized based on positive economic fundamentals (price-to-income and price-to-rent ratios) is far better than buying prematurely as values are still in decline.

if you have a long time horizon then real estate has proven to be a good investment.

If by "good investment" you mean as a hedge against inflation and forced savings, then agreed. Otherwise, Yale economics professor Dr Robert Shiller has documented the US residential housing market during the 100 year period preceding the recent bubble appreciated on avg at a rate of less than 1% annually after adjusting for inflation.
  • December 02 2010
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Profile picture for dacolan
There is about a 12 months supply of inventory in the Greater Cincinnati Ohio area. A normal healthy seller market is about a 4-6 months supply of homes....so buyers...there are a lot to choose from!!  And there are much more "shadow inventory" yet to come on the market...at least a 2 years supply.

The law of supply and demand suggests buying now will mean overpaying. Oversupply + weak demand = more downward pressure on house prices.
  • December 02 2010
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Profile picture for dacolan
Buying power is at an all time high, rates are low, and values have a lot of upside.  My vote is "YES" !

What happens to buying power when rates go up? What happens to house prices when buying power diminishes (in a stagnant economy no less)?

Recommending now is a good time to buy knowing this, even as house values are falling in most major metros according to Case-Shiller's most recent numbers, only serves to undermine the credibility of advice offered by RE pros.
  • December 02 2010
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Profile picture for Johnexo
Housing is local. Whereas every local market will follow this pattern, and the aggregated US-wide market as a whole will follow this pattern, every market individually will correct on its own time scale. My own experience is that high-end markets are taking the longest, for instance.
Real estate market facts
  • December 02 2010
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Profile picture for blank screen EXILED
I have yet to meet an agent anywhere that can locate a "dream home"; nor have I read any agent that can clearly define what the American dream was, is and will be.  It certainly is not paying a mortgage for 30+ years and spending 40 hours a week in home repairs, home maintenance, and mowing lawns by hand.

An architect may do a bit better with realizing a "dream home" but that is much more likely to be outside of a reasonable price frame for a typical household, and most potential buyers don't know enough about construction and their needs and desires to properly communicate to the architect that abstract "dream".  Until you have been in at least 3 dozen homes for at least 10 days each, you probably have no clue why something works or doesn't work.
  • December 02 2010
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Profile picture for SteadyState
I did not yet find my original source but here is a WSJ article that pretty much says housing as an investment is not lucrative.

Of course now the agents who want us to buy will appeal to emotional factors such as:
If you are ready to get into your "own dream home"; owning is a personal choice; owning is part of the American dream, etc. etc. etc.

The numbers do not support the claim that "this is the right time to buy a home". The numbers say exactly the opposite - for most Americans it may never be right to buy a home as it will "contribute nothing to the revenue of its inhabitants" (quoted from Adam Smith)
  • December 01 2010
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Profile picture for SteadyState
"a dwelling-house, as such, contributes nothing to the revenue of its inhabitants".

   Adam Smith

Please reflect on that carefully. I believe a long term study (50+ years) was done on the annual return of housing - it returns 1% for most home owners; I will search archives for the reference and post. It is not a great investment - the S&P 500 returns over 8% long term. Moreover, the 6% in commissions and the 3% in closing costs and miscellaneous fees makes buying a home even more risky in current markets. (Think of it this was even if your mortgage payment is exactly what you pay for rent you are still 10% under water the day you get the keys to your home).
  • December 01 2010
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There is such a thing as calculated risks and if you are wise and do your homework then you will know if you should buy now or wait. Also,too many folks forget that Real Estate is all local and not national. There are parts of this country where real estate is doing very well.
  • December 01 2010
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Profile picture for blank screen EXILED
Surely Paulson's comment about buying real estate is out of context.  None of the article is about real estate, but about stocks verses bonds, and then a quote is thrown in at the end about Real Estate?

A quote is meaningless without the context.

He states 2% GDP growth for 2011 and 2012, but double digit inflation within the next 3 years.  To me, that mean inflation in 2013, which is highly likely, but the jobs industries cannot support that by then.

So, since the Federal Reserve is doing what it can to keep mortgage rates low, and to encourage rapid inflation, it appears to me what they are really stating is buy in 2012.

But even then, the stocks that he recommended have returns of less than the present interest rates on new fixed rate mortgages, so one is still better off paying cash, unless one knows for certain when the double digit returns are going to hit the stock market.

As for the stocks he recommends, is he really going to reveal his personal strategies so that everyone else in the world can invest against him?  Isn't it more likely that he will recommend what he already owns, so that others can drive the price up, so that he can dump what he owns for a sizable profit?

Billionaires don't get that way without taking advantage of others.
Trusting their advice is like asking a loan shark how to make money.
  • December 01 2010
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Profile picture for blank screen EXILED
"A home is an asset and typically the largest source of wealth a family will have." -

A home is a liability and typically the largest source of debt that a household will ever have.  Buying now with less than 20% down will likely mean the loan is substantially underwater in less than 2 years, and high probability of foreclosure, substantial reduction in credit rating, difficulty getting good rates on any credit, and possibly even bankruptcy.

Realtors® have never been good financial advisers nor financial planners.  Most of them can't even fill out their own income tax forms by themselves!
  • December 01 2010
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asking a question to answer it yourself? do you talk to yourself a lot too?

agents: for the past 4 years, according to 99% of you, it has been the best time to buy a home.

why don't you pull your collective heads out of your culos, look at your track record, and first address the HUGE credibility gap you now have...

3 months ago, on here, the same thing it is the best time to buy... rates are low... blah blah blah, and meanwhile YESTERDAY case-shiller came out with evidence that 18 out of 20 major markets are dropping again...

Here is a link to "buy now cause rates are low its the bet time to buy... from NAR 2006" link

Read it over, and think about what this means. SInce 2006... best time to buy, cause rates are low... It is really time to be a little LESS STUPID if you are going to right advice...

 
  • December 01 2010
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I agree with the facts that Paulson presented regarding overall reduction in real estate values and record low mortgage interest rates.  I do add the caution that the national picture is not a "one size fits all" as markets vary in terms of the stage of the real estate cycle they are in, lenders desire to lend, and employment.  Also important to remember is that everyone's situation is different resulting in different time horizons.  I believe the market presents a good investment opportunity for those whose time horizon is 5 to 10 years.  I believe that anything less than that is pure speculation.
  • December 01 2010
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It depends, if you are in the right financial position then you should consider  buying given the extremely  low cost of capital right now.  Additionally, and most importantly, one should consider the state of their current market.  Every market is different, some are horrible and still going down and others have bottomed out and seem to be on the way up.  A home is an asset and typically the largest source of wealth a family will have. The key concept is to do it for the right reason and do it for the long hall.  We all know your home is not going to double in value in a year.



Best,



Bobby 
  • December 01 2010
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Profile picture for the_country_hick
With the exception of the bubble years real estate always went up in value just about the same amount as inflation took away.

Once you add in repairs, taxes, and insurance as an investment it is horrible. (unless you get more from rent than is paid out)

As the bubble is still deflating buying now is a bad idea. Just going from 4.25% to 8.5% interest rates will decrease buying power by over 1/3.

a 30 year $100,000 mortgage at 4.25% costs $491.94 a month
a 30 year  $64,000  mortgage at 8.50% costs $492.10 a month
a 30 year $100,000 mortgage at 8.50% costs $768.91 a month

Who does not expect to see much higher interest rates over the next 5 years?
Consider quantitative easing 1, and now 2 before replying. Those just print extra money with nothing behind it. That is the formula that has led to inflation every time it has been used.
  • December 01 2010
  • 2Yes

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