Wednesday, December 10, 2008

It May Be Time to Think About Buying a House

I saw the piece over the weekend in the NYTimes but hadn't gotten around to reading it until today. It's been their most read article for nearly a week now so I thought I'd give it a skim. An important and true opening 'graph:

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

But when is the right time? At least around Chicagoland, unless you can get a steal, I'd wait 6 months before buying anything. My view is that surely until the new administration comes into office things will remain dour. Then, I'm expecting Obama to make a big economic push right away but it will still take 2-4 months from legislative passage until that stimulus gets into the real economy. With greater confidence, I don't think you lose much by waiting until spring 2010.

As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines.

How should you proceed if you're planning to buy a home in the next 1-2 years?

Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.

You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.

John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.

While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable.

Remember the tax credit and it's expiration date.

Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

7 Comments:

At 2:04 PM, Blogger Mberenis said...

Have you heard the GREAT news? There has been a major change in the real estate industry due to the bailout and there is beach condo's, islands, and beach property literally for the taking. Most people would be surprised what they find after only 10 minutes of research. Many of them now own beach property and islands for under $10,000.00 USD.

Buy Beach Condos

Island Realty

 
At 3:25 PM, Blogger Eric Rojas said...

Hey Buddy,
Long time no write... check out my Blago series this week.

I might disagree with your "waiting game". There is no guarantee the right deal will be there for you later. I personally have offered on a foreclosure (lost in a multiple offer) and have won a multiple offer short sale for my clients on another place this month.
Meaning, many preceived the prices as agood deal and jumped. This is still very rare, even in our worst months here after Red October.

You did acknowledge people could jump if it's a steal. But finding the combo of good location, good building, good price is still tough... especially if you don't write and offer.

I know of sales happening now that are $50K less (give or take) than previous sales on units for sale simply because the buyer wrote an offer (did not have to wait and compete when the price finally would be lowered).

Anyway, I'm biased here, but also put my own money where my mouth is. Making an arbitray decison when it's better to buy based on the current market is like trying to time any market. I think if a home is what you want and you have a good understanding of the location... and you can afford it... take a shot.

If you were in the market today (say renting and needed a place for your growing family) you'd wait another 6 months even though a great house becomes availble?

 
At 3:27 PM, Blogger Eric Rojas said...

To clarify my point, you have to be ready for a great deal. They are rare. I don't think the "great deal" landscape will change from now to 6 months from now.

 
At 1:06 AM, Blogger donald said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Betty


http://www.my-foreclosures.info

 
At 10:07 AM, Blogger panama said...

Peter,

great buddy, your posts seems to as Q & A session, that is very helpful.... Thanks for it,

good to have some references too,

-Kathy
panama real estate

 
At 8:24 AM, Blogger Jim said...

To decide which is the right time for buying a home is really a tough decision. In this situation when the real estate sector is under the pressure to lower its prices with the passing of every day to sell its flats. Obama has given the stimulus but still its not able to give the boom to the real estate sector. So if you buy today, then we can experience lower price on the next day. So before buying any home we should check all the details and also try to feel in which way the real estate market is moving in our city.

 
At 12:52 AM, Blogger Joshua said...

I am an real estate broker and very eager to see the real estate market back on track, but I can predict that in near future the real estate prices are going to touch more low. If anyone wait for that time, they can make more profit. In real estate market there will be more steep competition very soon to get out of bad phase. So I would suggest to wait for sometime and keep vigil eye on the prices.

 

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