To Buy or Not to Buy?

Why is it a good idea to buy?

Interest rates are at the lowest point in history. This means you pay less and get more. I say you get more because not only are interest rates low but so are the price of homes.

Answer to the subject question... BUY!!!
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October 05 2010 - US
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Replies (21)

Profile picture for the_country_hick
I have no idea why i is a good time to buy. In fact I think it is a terrible time to buy.

Low interest rates are killers of equity in houses. going from 5% to 7% interest rates takes away 23.9% of buying power. Expect that to mean that a $200k house now would have to drop to $152k to be bought at the same monthly payment. OOPS!!! we are below 5% interest now. It would take off more than 1/4 of the buying power and thus prices of houses.

House prices are still high by historic standards. They are improving but not there yet.

p.s. learn to ignore the NAR talking points crap and think for yourself. If you took basic economics you would realize that buying anything at a lower interest rate allows you to pay more than if interest rates were higher.
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October 05 2010
Profile picture for jal74
Question

Based off of your argument, when exactly would it not be a good time to buy?

Back in 2006 rates were at the lowest point in 25 years - was that a good time to buy

Back in 2007 rates went up a little, but they were still lower than the average rates for the past 20 years - was 2007 a good time to buy?

In 2008 rates collapsed back to lowest level in 25 years - was that a good time to buy

Given that there is currently 9.5% U3 unemployment rate and 17% U6 underemployment rate, and also given the fact that there are more vacant housing units at any other point in history, there are more properties facing foreclosure than at any point in history that somehow your statement will suspend the laws of supply and demand?

If any prospective home buyer were to look at what you have written, do you think they could take away from it anything other than you screaming I AM A USED HOUSE SALESMAN and wondering if you don't make a sale fairly soon, you will become the next foreclsosure statistic?

I mean seriously, do you really think that after the disaster the US housing market has gone through in the past 5 years that pretty much everyone at this point laughs when REA's go down Lawrence Yun's famous taking points list.
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October 05 2010
Profile picture for Pasadenan
I agree with Thomas, that he should buy my house for $3.2 million.  No contingencies will be accepted.  Seller financing is available at 6% annual interest as long as at least 50% is put down, and all pertinent data is provided with credit scores and income in the appropriate range.

(Anytime a sales agent is begging people to buy, you know that everything is still way over priced.  When they start begging people to list instead, then maybe the pricing might start to be in the right range).
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October 05 2010
Why is it a good idea to buy?

(Because I haven't eaten in a week and they're shutting off the electricity. I won't be able to get on Zillow anymore!)

Answer to the subject question... BUY!!!

At our morning meeting there was fervent discussion about how we should all get on Zillow!

I bit my tongue.

All I can imagine is 60 plus NAR cheerleaders providing light and fluffy content with zero nutritional value.
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October 05 2010
Profile picture for wfamilyman
When the price is right for you.
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October 05 2010

I agree that the posted question doesn't really merit much response but in case someone is reading this for advice this is what I think:

It probably makes sense for you to buy now if:

1) you plan on staying in the house for at least 5 years. (I personally believe that prices will be about the same 4 years from now as they are today in most areas.)  And....

2) the cost of buying is less than or very close to the cost of renting a similar house.

Some markets will provide better buying opportunities than others and in many areas and price points it doesn't make economic sense to buy now. 

People should also consider the P/E ratio of the homes they can buy in their locales. The price earnings ratio of housing is getting better and if you buy at a good cap rate the low interest rates currently available can substantially increase cash on cash returns for long term investors. 

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October 05 2010
Ian gets bonus points for mentioning price to rent ratio...
Unbelievable how many agents haven't even figured this first safety check out this late in the crisis.
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October 05 2010
Profile picture for Lady Chattel
When I can buy an average home for less than 30% of my TAKE HOME PAY....why do I say NET pay....because unlike many of my peers, I pay for a good health plan, I contribute to my 401K, and I like fresh-healthy food!  

Right now the avg home price will buy me a crap townhouse.....meanwhile I rent a 5/4 SFH and my rent has increased 0% in 3.5 yrs.......and I pay less to rent this house than to buy said crap average priced TH.   NO BRAINER!!!
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October 06 2010
Profile picture for dacolan
Welcome to Zillow, Thomas. Not quite the reception you were expecting?

Repeating NAR talking points won't buy you much credibility around here. Candid and informed advice and opinions will.
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October 06 2010
Ian, excellent points.  I would also add evaluating the local real estate and rental markets in addition (perhaps more important) current employment status.  Trends are things that people talk about but not all national trends apply to a local market.  In the recent months, I have helped clients who have been with the same organization for a number of years are secure in their employment and are paying a considerable sum in rent and not to mention taxes.  For the few that I have helped purchase a home buying now made sense.  I also have a number of tenants whom I have talked out of buying a house because of the amount of income as well as debt.  As professionals it becomes our fidutiary duty to help clients make the right decision rather than jump at the opportunity to sell a property. 
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October 06 2010

Sounds like we have a lot of positive people posting on Zillow with a lot of energy in their lifes! I love it! =-)

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October 06 2010
Profile picture for sunnyview
You say BUY, but I would like to ask WHY you think that it is a good time to buy in your local Palmdale market. You tell people to do it, but give them no local information to base a reasoned decision on. I would appreciate information more than just the conclusion.
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October 06 2010
Sunnyview, who is your comment directed at?  My market is in the Central Valley in California, mainly from Merced to Stockton.  In my market, the prices have stabilized and there has been higher demand for homes to buy.  When I say higher I don't mean huge amount. Simply more that last year, multiple offers on each property and properties selling for asking price or slightly higher and fewer days on the market.  All these indicators make my market a good place to buy for the right people.  Not everyone can buy currently and when I see a client not really considering everything, I discourage them from condisering to buy.  Rather I tell them to work on a few things and when the time is right (ie, collection accounts, accounts payables and cars have been paid off and items corrected on their credit reprots) I help them evaluate their current and future needs before jumping into buying a house. 
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October 07 2010
Profile picture for jadedea
for me its buy because i can get a better house with mortgage (including taxes) lesser than my rent, and my landlord just increased the rent.
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October 07 2010
Mobility is the KEY * if you have stable employment and won't be moving for 5 years, then buying may be a good option
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October 18 2010
buy buy buy sell sell sell buy buy buy 
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October 18 2010
Why wouldn't you buy right now?  Why pay off someone else's mortgage?  If you can buy, now is the time!
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October 18 2010
Lets see:
1. 12% of loans either in delinquency or foreclosure, near record highs.
2. huge drop in demand since the buyer's bribe/credit ended.
3. increasing supply on the mls, into fall when it normally decreases.
4. prices have already started dropping, which is actually easy to see for anyone who cares to look at the data.
5. because, unlike most agents, you might actually understand economics; increasing supply/decreasing demand = what to equilibrium pricing?
6. because the FED has been announcing that it will do everything in its power to lower interest rates/keep them down, thus any worry of rates being much higher anytime in the near future is probably misplaced.

How is that for a starter there Sarah?
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October 18 2010
Profile picture for Pasadenan
Sarah -

I agree with you on one thing... "why would anyone pay you a commission?"  I also agree with you "why would you subsidize a renter's living expense?"

But to answer your question, I would gladly pay a landlord's $30 a month mortgage to live in a 40,000 square foot house in a nice area for my family only rather than pay $3,000 a month for my own mortgage to live in a 900 sqft shack in the slums, especially when the equity is disappearing faster than the amount that goes toward principal.

But you wouldn't know these things because you are blinded by sellers that can't find buyers.



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October 18 2010
Profile picture for ChanceProAgent
I don't know where these rent numbers are coming from, but...I've lived in San Francisco, Bethesda Maryland, and Thousand Oaks. Would you like to know rent prices? ASTRONOMICAL. Rent rates directly reflect the location, and size of a property. This whole argument about renting a property vs buying is fairly absurd. Most of the houses being rented have been owned for 20+ years. I'm sure 20 years ago the same people would have been saying don't buy, don't buy, don't buy. So when is a good time to buy? 1990? 1995? 2000? 2006? Now? Seems something negative could be said for anytime. Here's a solution. You want to buy a house? Buy one...whatever. Ian is right, rent to mortgage ratio is huge. Yeah if I could buy a house that is 75k-100k less than it was a couple years ago, practically pay it off in 20 years and rent it to someone who wants to finish my mortgage, I would do it in a heartbeat. You know what? I think I'll buy one tomorrow. Thanks for the advice everyone, wonderful conversation filled with intelligent people. Have a great night
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January 31 2011
Profile picture for Lady Chattel
The real question of buying is whether your particular market dictates buying.  Does income for the area reflect area prices?  In my area the homes are priced at about $100K high for area incomes......looking around my neighborhood which started to be built in 2001 and completed in 2005 I know that most bought with alternative financing and now they own homes that have lost 200K in value since peak......so, why would I buy in my area when I currently rent for much less the same exact home that they are paying on.  One neighbor admitted to me they paid $555K and pay $3,500 per month for their mortgage......I have the same home and rent it for $2K.  Now, explain to me why I should buy????   After having a conversation with him I think he is convinced to walk away from his albatross that will take 30 yrs to be paid off and perhaps even be worth $555K!

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February 01 2011
 
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