Opportunities for Home Buyers
Jonathan Pond, Safe Money in Tough Times
December 15, 2010
We’ve been saving for a home for ages, but now we’re not sure if we should buy. The economy is too messed up, mortgage rates are higher than they were last year, and everyone says that home prices will keep going down. Maybe we’d be better off keeping our money in the bank.
It’s scary to think about making any major purchase and taking on a big financial commitment when the economy stinks—and there’s no bigger purchase than a home. What happens if you lose your job and can’t meet the mortgage payments? How will you feel if you buy a house, but home prices sink after you move in? Nobody can answer those questions for you, but nobody could in a boom market either. Boom market or recession, you still have to save for the down payment, become familiar with the local real estate market, and put your overall finances in good order so that you can qualify for a mortgage. Thanks to the severity of the subprime mortgage crisis, it’s even tougher than usual to qualify for a mortgage. If you’re afraid that you might need the money you’ve saved for a house in case you lose your job or undergo other financial duress during the recession or if you’re afraid to commit to 30 years of monthly mortgage payments, then perhaps now is not the time to buy. But if you have saved enough for a down payment and the rest of your finances are relatively well braced for any continuation of difficult economic times, now may be the perfect time to take advantage of a depressed housing market. True, interest rates may be coming down, and housing prices might come down even further. Don’t wait around for those things to happen, however. People who wait for ideal conditions usually remain renters. It’s not worth worrying about timing the exact moment to take the plunge. Prices are already depressed, and if interest rates drop significantly, you can always refinance your mortgage.
WHY BUY NOW?
Buying a home is one of the best things you can do to achieve financial independence. For most people, the advantages of owning far outweigh the disadvantages. This isn’t necessarily a bad time to be buying a home. In fact, it’s almost certainly a great time to buy. The Great Recession has caused steep declines in housing prices in almost every area of the country, creating a buyer’s market. If you have the money to make a down payment, and you’re reasonably sure that your income won’t be hurt too much by the recession, now could be the best time to buy in decades. As times get tougher, plenty of sellers are willing to negotiate.