I find that some potential homebuyers are hesitant to make a home purchase right now. Is this with good cause?
The national scene
Real estate continues to dominate the news these days. We know that gloom and doom grabs attention, and to be honest, there are people in trouble, particularly in California, Florida, the Las Vegas area, and parts of the Northeast. Although these areas are outside of Texas, it has probably not escaped your attention.
There were several factors that played into the situation in these hard-hit areas: easy credit for high-risk borrowers, 100 percent financing, too much speculation/investment/quick flips, and too much new construction inventory to name a few. The real estate industry tends to be cyclical in nature anyway, and these factors exacerbated a mild price correction after many years of unprecedented growth in those areas.
So, is now a good time to buy here?
It's extremely difficult to outguess housing markets. Turning points are seldom evident until after the fact and national trends may be meaningless in local markets. You may wait for prices to go down, but prices might have already hit their lowest point. In the meantime, you could be costing yourself money, either by not building equity or not taking advantage of a very good interest rate.
So is it a good time to buy? It really depends on your situation. If you plan to be in your house for more than a few years, it's probably to your advantage to buy, regardless of the condition of the market. Remember, it's not so much what's going on in the market; it's more about what's going on with you.
Interest rates are just as important as the sales price - maybe even more so. Consider that any reduction in interest rate provides you with more buying power. That means that someone who gets a lower interest rate could purchase a more expensive home and expect roughly the same monthly payment as someone who gets a higher rate on a lesser home. My point is that you can't look at only one factor. If the price of homes goes down, but interest rates go up, was it really worth putting off your purchase?
Why you should buy
Very simply, buying a home is the only investment that you can make while paying for a necessary expense - housing. Any other investment is financed with discretionary income. What do I mean by that? Name one other example of money you spend every month on which you'll see a return on investment. Gasoline? Food? Utilities? Rent? Not one of them. Putting money towards purchasing a home, instead of renting, will help you build wealth.
Are there fluctuations, corrections and short-term risks? Of course there are - as there are with any long-term investment. Historically, though, real estate has shown slow, steady appreciation, and we have absolutely no reason to think that will change.
In addition, there are tax incentives for homeownership. Mortgage interest deduction can be significant, especially in the first few years of a loan. Additionally, in late 2007, lawmakers extended a tax deduction for private mortgage insurance, which lets homeowners take an itemized deduction for PMI on a personal residence.
Homeownership has obvious financial benefits, but there's more to it than that. There are strong non-financial benefits to owning a home for you and your family. It's positive for our communities and our nation as a whole. Many studies confirm that communities with high homeownership rates have lower crime rates, higher student test scores and more involvement in local affairs. Being a homeowner provides stability and gives you a strong stake in the future of your neighborhood.
Realtors know the value and joy of owning a home and we understand the financial advantages, as well. If you have any questions or are hesitant about taking the leap, contact a Realtor for professional advice and representation. You can learn more about why buying a home is a shrewd and sensible investment for most people.
Whether you're interested in buying your first home, your next home, or just want to know more about home-ownership in general, I encourage you to check out a couple of great online resources: http://www.texasrealestate.com/ or http://www.har.com/ and for all of your Pearland TX and Northern Brazoria and Galveston County real estate needs, please visit my site at http://www.danfrankrealty.com. All of these sites offer tons of useful, real estate-related information geared specifically for Texans.
Danny Frank is a local Pearland TX Real Estate expert
This column was published in the 14Dec08 edition of the Galveston County Daily News