Buying a Home in Today’s Market

Kari Monk, over at Wells Fargo, just sent me her quarterly newsletter and there’s an article in it by David Bach, entitled “Buying a Home in Today’s Market: Why Homeownership is Still a Smart Decision“.  David is the author of seven books including “The Automatic Millionaire Homeowner™ “,  “Start Late, Finish Rich®“, as well as one that I’ve read, “Smart Women Finish Rich“.

David’s article for Wells Fargo covered seven reasons to proceed with buying a home at this time, regardless of the current housing market turmoil and tougher lending guidelines.  The key points in his article include:

1. Homeownership is a solid long-term investment.  His perspective is that “it’s probably the smartest investment you can make during your lifetime.”  Over time, homeownership has been a key reason families have generated wealth, something that renting does not do for you. 
2. The IRS gives big advantages to homeowners. The government gives you tax breaks for mortgage interest and insurance, as well as for property taxes.  Check with your tax advisor to run through the numbers.  Who knows, your after tax mortgage payment may be equal to or less than your rent payment?
3. Generally speaking, home values are still rising.  According to government statistics*, home prices across the country rose 3.2% during the past year. While this rate is slower than what we’ve seen in the more recent past, in some parts of the country, the value of the typical home continues to increase. Since 1975, the average annual appreciation rate for a typical home has been 6%.
4. What the Market is doing nationally is irrelevant to you.  Real estate is local.  The only market for you to track is your local market.  Research the local job market. And ask your real estate agent about the current housing market, including the local inventory, days on market, and selling prices.  Look at the numbers, and don’t let the headlines scare you away.
5. Buying opportunities have improved.  We are in a buyers’ market.  Sellers are more willing to make concessions on price or pay part of the buyer’s closing costs.  Mortgage rates are still relatively low, and while lending guidelines are more stringent for those with less than stellar credit, buyers with good credit may not notice any difference.
6. You don’t have to worry about timing the market.  Most people would like to buy a property when it’s priced at its lowest, but as David says “It’s not timing the market, it’s time in the market.”  His observation is that if you’re making a long-term investment (four years or more), that you are usually better served just getting into the market.
7. Smart home financing options are still available.  Yes, there are still a wide variety of home mortgage products available. Ask your lender questions and understand what you are getting.  Make sure that you making a wise decision based on your situation and preferences, so you are advancing your financial security.

As David summarizes, historically homeownership has provided a path for Americans to move ahead financially.  Look beyond the news headlines.  Do your research.  Decide for yourself if this is a good time for you to buy a home.

To hear more from David Bach, you can subscribe to his blog.  Also, if you would like a copy of his full article in the Wells Fargo newsletter, let me know and I’ll send you a copy.

*David’s source for housing appreciation figures: Office of Federal Housing Enterprise Oversight, House Price Index, August 30, 2007, www.ofheo.gov.