Should we be waiting? Some are still suggesting waiting until prices "bottom out" before purchasing a home. But that suggestion begs the question; how do you know when home prices are at their lowest point? The reality is the only way to know the bottom of any market is to look back after prices have risen over enough time to establish a new market trend.The problem home buyers experience with the waiting option is; as the real estate market is bouncing back, inventory levels are dropping. This diminishes the excellent selection that was available when prices where still adjusting down. Our real estate market has already experienced a significant drop in pricing and in many price categories we still have decent selection. The best time to purchase your home is when the market provides the best combination of price and selection. We are seeing that combination today.
If we are buying a new car, TV, appliance or any other item, we can delay our purchase in anticipation of a lower price. Whether we are right or wrong about the future price of an item, we can still purchase that exact same item later. A home purchase is unlike any other purchase a family can make. A home is where your family lives. Homes are very personal and each home is very different. When more choices are available, you have a much better chance of securing the right home with more of the features you really want. When real estate prices are rising, demand is up and inventory levels are down, you will have far less chance to get what you want.
Home prices are excellent. Real estate prices hit their peak in the spring of 2006. Since that time, real estate prices have adjusted 10% to 20% lower. We have the best combination of price and selection seen in over three years.
Rent is very high today. 2 bedroom apartments average $1,500 per month. 3 bedroom condos are $2,000 per month. 4 bedroom houses are $2,400 to $3,000 per month and more. Unlike mortgage interest and property tax, RENT IS NOT tax deductible. The benefit of owning is you control your living situation, not the landlord.
Real estate makes you money. At the top of the last real estate cycle in 1990 a 20% down payment for the average priced home was $50,000. Even though 1990 was the worst time to buy a home, by 2005 the average home price had risen by $350,000 earning that 1990 home buyer a 700% return on their initial $50,000 investment. That is quite a return on investment for a "Bad Buy". To put this profit return in perspective, the investment industry considers a 100% return on investment every 7 years as being very good. The worst Orange County home purchase you could make in the past 50 years beat this high standard by nearly 300%. Imagine if your home purchase wasn't the worst buy - Just average. How good will your returns be?
The Bottom line is: You have to live somewhere. Why not live in the home you really want? If you love where you currently live, well don't move. But if you are not satisfied with your current home, you should probably consider trading into a better home for your family. You may be concerned the home you want will cost too much each month. But the truth is you are already paying to live where you're at. The mistake is focusing on the total new monthly payment for the better home. Since you have to live somewhere - It's the DIFFERENCE in payment that counts. And this difference is reduced even further by your tax write off. This means the government can pay up to 40% of the difference in the new payment. You may be a lot closer than you think to the home you really want for your family.
This was written by a another very wise Realtor who hit it right on the head.