One of my office mates recently got another house that was closer to his family's activities. From the looks of mortgage rates now it seems like he could have gotten quite a deal, even now! Rates have stayed down for quite a while — quite a bit longer than I had thought they would, I admit.
Rates have been in the basement for a few years, historically speaking. Fixed 30-year mortgage rates now are less than a third of what they were in the early 1980s. From our home ownership experience over the past ten years, the rates have just gotten better each time, from our first 30-year mortgage in 2001, to our refinance in 2005 (1% less to a 15-year mortgage, maybe only a slight gain there since 15-year mortgages are cheaper than 30-year mortgages), to our 30-year mortgage on our new house in 2010 (which was at the same rate as our 15-year refinance in 2005 — a decent gain). Rates now are even cheaper.
And on top of the low mortgage rates …
As a double bonus (for buyers anyway!) home prices have fallen in many areas over the past four years or so. We bought our current house at a time when the $6,500 long-time homeowner tax credit was in force. The expiration of that credit removed some of the support for home sale prices, and we've seen home prices in our neighborhood edge down a little bit. I think that prices still have room to go down.
So, why am I talking about this stuff? Overall, the conditions for buying a home, if you can, are quite good, and might get even better. But if you're in the market, how long do you wait? I'm not advocating buying a house or not buying a house. The suitability of buying a house depends on lots of things: career, family situation, location of relatives, location to work, debt load, health, etc. It's not only a matter of affording the monthly payment plus all of the taxes, insurance, maintenance, and utilities.
But let's say that you and your family is indeed ready to buy a house, and can maintain one. The timing in the story that is your life is ripe to buy a house. Let's further say that a beautiful home — the perfect home? — comes on the market. The asking price is good, maybe even great. Nothing glaring is there to make you run away screaming. The pre-qualification letter from the bank comes back with a giant thumbs-up and a smiley-face stamped on it. Basically, you've done your homework, and the house feels right. It feels like it's meant for you, and you haven't even bought the thing yet.
My one piece of advice is not to let the potential of a falling market by itself stop you from getting it now.
Sound silly? Why am I not suggesting that you try for a bigger bargain? A few reasons:
- Odds are that you will be able to get it cheaper, or one very similar to it, within the next couple of years at least. The housing market is like any market. It's difficult to time, and it's just about impossible to hit at the absolute bottom. If you come to grips with that, that alleviates a lot of buyer's remorse.
- That particular house may not come on the market again for a long time. This almost happened to the house that we're in now. I got my pre-qualification letter, and the next day someone else put a contract on the house. My wife was upset. She really liked the house. I called the listing agent and asked her to please let us know if something fell through on the contract. Something did fall through, and we were ready the second time around. But it just as easily could have not fallen through, and we'd be looking again, half-wishing that we had acted sooner.
- Really good prices don't last forever. If the housed truly is priced to sell, it will sell. If that price (or something a tad lower) is affordable to you — and presumably it is affordable, because you've done your homework — then put an offer in. You're ready to buy, so buy before someone else does.
If you're in the market for a home, and want to take advantage of the low rates and low prices, and find a great one that's affordable (by your standards, not the bank's), then pull the darn trigger! The extra enjoyment you'll get out of owning your house now will be worth it, even if you might have saved $50/month on your mortgage by waiting a couple of years.
The Fed has committed to keeping interest rates in the cellar for at least the next couple years.
Yeah, unless you’re buying a house strictly for investment reasons, the best time to buy is when you need/want to buy AND can easily afford it (and all the associated costs that come with a house).
If you can handle it (the payments, taxes, insurance, maintenance, etc.) I say, why not? Rates are low, houses are cheap so why not go for it? I’m surprised it doesn’t lead tons of buyers to the market.
We were fortunate that the housing market was in the buyer’s favor at the exact point that we would have purchased a home anyway (right before we got married). We purchased in September 2009 at 5.5% interest, and received the $8,000 homebuyer tax credit that we didn’t have to pay back. Hurrah!
I hope others find great deals as well; though of course you do not want to purchase something that is a good deal if you cannot afford it.
How fortunate that your subscribers can qualify for a mortgage period. This country’s leaders, statemen, and journalists seem to have forgotten about the hundred of thousands that have lost their hard earned credit partly due to the gross negligence and irresponsibility of it’s elected officials, greedy, unregulated banks and wall street etc etc etc.
Very good points. What a lot of people don’t realize is that mortgage rates being as low as they are offsets the risk that prices home could drop any further. In other words,it is “cost” and not “price” that should dictate whether now is the best time to buy.