Should You Buy Real Estate Now?
August 29, 2007
I happened to find this posting on the Motley Fool after a reader asked whether she should buy real estate now.
In Is It Time to Buy a House?, John Rosevear answers the question as best as it can be answered.
If you need a new home, and you can afford one, it’s time to buy — whether the market is up or down. I’ve called home ownership “The Best Investment Ever,” and when you look at the complete picture, it’s true — there are many tax and financial advantages to owning a home, and homes do tend to appreciate over the long term. And you’ve gotta live somewhere, right?
And,
If you’re both smart and lucky, you may see a sizable windfall if and when you sell your house and buy something smaller. But the idea of investment returns is — or should be — a minor consideration next to the major homebuying drivers — cost, location, condition, and the big one: Do you really like it?
Even if you’re buying a home strictly for investment purposes,
…fluctuations in market prices aren’t much of a factor in the purchase decision, except to the extent that a change in value has made a property significantly more or less profitable.
The key to buying a house in any market is to do it intelligently. Do your research, hire experts, don’t over-extend yourself, put as much money down as possible and buy something you really like. You can pay too much in any market. There are also too many variables that affect housing prices - most of them out of your control and amny that can’t be anticipated.
Entry Filed under: Buying a House, Connecticut, First time home buyer, Prices, Real Estate, Real Estate Investing, Real Estate Market. .
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1. Richie Urban | September 5, 2007 at 7:16 pm
Excellent post! IT’S IMPORTANT THAT YOUR READERS REALIZE THAT THERE HAS NEVER BEEN A BETTER TIME TO BUY REAL ESTATE THAN RIGHT NOW!!!
Real Estate Investor in South Florida
http://richurban.wordpress.com/
2. Eric Foster | September 20, 2007 at 3:58 pm
Good Post. And I agree… you need to live somewhere!
For those wanting to buy a home of their own to live in or as an investment, now and the upcoming months will be a good time to buy.
Eric Foster
http://www.BuildingMyRealEstateEmpire.com
3. frances berger | September 21, 2007 at 1:39 am
The National Association of Realtors, the self proclaimed ‘Voice of Real Estate’, is still insisting that real estate is a good long-term investment. This statement is not only ridiculous, it is irresponsible and irrational. Any way you do the math, buying real estate at the beginning of a massive housing downturn is a terrible investment.
Think about it. Homes are usually purchased with 80 to 100 percent debt. Let’s say you are a diligent saver and make a 20% down payment on a $500,000 home. If home prices go down only 20 percent, you will lose 100 percent of your investment and your equity will be completely wiped out. What if prices go down by 30%? In this case you will not only lose your $100,000 down payment, but you will be underwater in your mortgage by $50,000.
Even stock market investments aren’t that risky. At no time in history (and this includes the great crash of 1929) have investors lost 100 percent of their net worth. But this is exactly what will happen to the majority of the homeowners in the U.S. that buy during this market collapse.
My advice
Save your money. Rent a home you are comfortable living in for a few years and you will be able to buy a lot more house once the market ends its freefall and the dust settles