House Prices – when does it make sense to buy?
Fitch: Housing Prices Have 10% to Go Before Stabilizing
“Fitch’s analysis shows that the 29% rise in prices realized between 2004 and 2006 … has been reversed. With prices returning to early 2004 levels, Fitch believes that most of the additional 10% decline … will occur over the next eighteen months. Fitch then expects declines thereafter to moderate
via Calculated Risk: Fitch: House Prices to Fall 10% over next 18 months
Okay, if that in deed is accurate, then I’m going to “tweak” my 7 year plan a bit. Let me lay out my thoughts:
1. It’s going to take approximately 7% to sell the house (6% brokers fees plus other assorted costs).
2. If you buy a house today and the house price drops 10% in the next 18 months.
3. And then things are flat for 2 years before we start seeing 2 to 3% per year appreciation.
Then that means that you’d be looking at approximately 8 to 10 years from now until when you’d “break even.”
So, from that standpoint, I’d recommend that you not buy a new house unless you are planning on it as an 8 to 10 year plan.
Now to throw another item in the mix…..
If you wait 1 year and can buy a house for cheaper but rates go up 1%, do you win or do you lose?
The math says that a 10% drop in prices vs. a 1% jump in interest rates works out to be pretty much a ‘break even’ in terms of carrying costs. However the equity build up by buying now is greater than it is by waiting a year. (Approximately $4,000 over the 10 year time frame.)
So is now a good time to buy a house? Under the right circumstances and with the right financial analysis, it could be.
Call me at (616) 292-7559 or e-mail me at Straight Talk and we can talk about it further.
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