Should You REALLY Buy a Home Now?

by Miranda Marquit · 11 comments

It’s true that mortgage rates have been going up. However, interest rates are still quite low, and home prices are quite competitive. And, with the economy showing signs that the pace of recovery might pick up, many are beginning to think that now is the time to buy a home. After all, when will you be able to find such a great deal again? While it is no doubt tempting to rush out and buy a house, it might not be the best time for you to purchase a house just yet. Give these questions some consideration before you decide.

Why Do You Want to Buy a Home?

Before you purchase a home, it is important to explore your motives. Be honest with yourself. Why do you want to buy a home? Are you tired of renting? Do you want a place you can call your own? Do you hope that, by buying now, you will have an appreciable asset you can tap into later if you need to? Do you think you will buy the home as an investment property and rent it out to generate an income stream? Do you want to buy because it seems like the thing to do?

The motivations behind your desire to buy a home should be examined. If you are buying because you think your primary residence counts as an “investment”, it might be time to rethink that position. Consider the costs associated with your home, from the mortgage and the interest (the interest!) to property taxes to maintenance and repairs. Even with tax advantages, you might not be able to make a convincing argument that your home will increase enough in value to constitute an investment.

However, if you are buying because you would like a place you can call your own, providing stability for your kids, and allowing you adequate space to enjoy your life, then it might be worth it to buy a home. It might not be a great financial investment, but the emotional investment might be worth it, as long as you view your home as a large purchase.

No matter your reason for wanting to buy a home now, you should critically examine your motivations, and then come with counter-arguments for buying a home. You should consider that things will not turn out as you would like if you attempt to rent the home out for extra income, or that perhaps buying just to buy might not be the best reason for getting anything — especially something so expensive as a house.

Are You in a Position to Buy?

Another issue to consider is whether or not you are in a position to buy a home. Part of the reason we’re in such  a mess right now is that many people got homes — even though they weren’t in a good position to buy. Before you consider the home purchase, your debt should be under control, and you should have some sort of reliable income. Additionally, you should have a down payment saved up, and be prepared to handle the extra expenses and responsibilities that come with home ownership.

Take an honest look at your finances, and determine whether you are really in a position to buy. The best deal in the world can’t compensate for not being financially ready to own a home.

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{ 11 comments… read them below or add one }

Ramona Iftode February 15, 2011 at 6:47 am

The entire world is still under chills from the recession. Some countries still struggle, some are improving their economies. I don’t think NOW is a good moment for debt AT ALL. We’ve been pretty hit by the recession and most of us because we spent more than we could afford. On houses, cars etc. And they all value peanuts, as compared to the inflated prices we paid for them 3-4 years ago.

This crisis should teach us 2 important things: 1. SAVE money as much as you can and stop splashing it for useless junk and 2. never get yourself in serious debt just because the bank approves your application.

I wouldn’t rush into buying a house too soon, that’s for sure. Renting does work well. All this time we can actually get better at saving money and preparing ourselves for possible “dark” times ahead. Only when we are financially secure, we can think about the next step.

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Ginger February 15, 2011 at 7:39 am

For most people, yes but over this recession we have saved more, my DF has increased his income and we have reduced debt. Why should we not take advantage of the low prices/low interest rates to pick up a rental property? We still have a long way to go before we retire but we are improving all the time, both in income and in frugal ways.

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Jenna February 15, 2011 at 9:26 am

I’m really interested in buying a home for a couple of reasons, my parent’s flip houses (so it’s in my blood) and prices are so cheap these days. I’m currently looking and just waiting to see if the right one comes along.

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vered February 15, 2011 at 12:42 pm

“If you are buying because you think your primary residence counts as an “investment”, it might be time to rethink that position.” I agree. I’ve been reading in many financial publications that it might be time to reexamine the “American dream” of owning a home.

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Nate February 15, 2011 at 2:23 pm

Great post. I’d like to expand a little on your mention of maintenance. I think a lot of people (myself included) underestimate how much routine maintenance on a home really costs. You have to pay for EVERYTHING out of pocket – things like lawn care, snow removal, heating/cooling service, etc. Then there are the unexpected repairs (like a plumbing leak or broken window) – all of which are on top of your mortgage and regular bills. Depending on what kind of house you buy (and how old it is) these things can really add up. It’s something to keep in mind if you’re on the fence about buying a home or staying put.

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Michael Real February 16, 2011 at 12:21 am

Just a piece of advice. One should know if one is capable of buying a house. If you are going to buy a house and you still don’t have that sufficient income or source for the money then better to improve your money-making assets first before going for a house.

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Tess The Bold Life February 16, 2011 at 9:23 am

Hi,
“And, with the economy showing signs that the pace of recovery might pick up”

I just don’t see this happening until jobs are created. It’s no secret that Michigan’s economy is in the toilet. Steelcase recently announced it’s moving it’s three plants to Mexico. How will those former employees, as homeowners continue to pay their mortgages? This scenario is being repeated in every state to some degree. I see the key word being, “Might” in that sentence. It’s hard for people to face reality. We will continue to lose ground until people find good jobs. Period. I would love for you to convince me that I’m wrong.

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Tess The Bold Life February 16, 2011 at 9:24 am

One other thing…if you are in a position to buy a house…wait…the prices will continue to fall as more and more people lose jobs and homes. It may be the easiest way to save your money.

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Sichermove February 17, 2011 at 2:49 am

Reason for buying home can vary from person to person, Every person has own idea.

Some want to buy home bcz they do not want live in rented home.
Some want a place they can call it is our.
Some want to increase there assests.
Some buy home and sale them when prices are high.

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G-Dawg June 23, 2011 at 9:27 am

Buying a home is still the best long term investment hands down. Keep renting and see how that feels when your retirement plans take a dump. Retirement plans are based on the market value, and the money you put it can be lost with a market swing. Making regular mortgage payments on a normal amortized mortgage loan will equate to a principal reduction over time (make the distinction here between housing and investments) and if you time it right, you will have no rent in you retirement years. The difference is, I am paying something off with a mortgage and not banking money that can fluctuate. My home value may fluctuate but end of the day I will pay off my mortgage. One major depressing thought is, as a renter, you’ll have to move a dozen times in your adult life due to stupid landlords and other annoyances. There are HUGE benefits to buying that go way beyond this article.

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JimBob April 16, 2013 at 8:25 pm

A home purchase IS an investment……..how good (or bad of one), is up to the buyer, the price they pay & the LOCATION, LOCATION, LOCATION of the property.
I know, repeat, KNOW that our home is and has been a great investment, because of where we bought it, the price we paid and the actual value of the home (not perceived). We got a steal of a buy in 2009, on a foreclosed home, inside the beltway in Washington DC, near great schools, the Metro, parks, a suburban downtown hotspot and less than a mile from the beltway. We’re half a mile away from the DC line & a 20 minute commute via Metro or car, into the heart of DC, yet we live in a County that has the best public schools in the nation.

We initially put 40k in necessary upgrades to the foreclosure through a 203k loan to get the place into pristine shape (new boiler, new ac/heating, new windows, new gutters, re-finished the hardwood floors, re-finished the basement, new plumbing, upgraded kitchen, etc.) and since then we’ve added about another 10k out of pocket for a new driveway, privacy fence, custom built storage shed and new landscaping. You can’t even tell the new house, from the one we bought in disrepair, 4 years ago now.

We re-financed the original 203k loan in 2010 (which was at 5.5%) down to a 3.76 fixed 30 year & we make additional monthly principal payments + a bi-weekly mortgage accelerator. The house will be ours in 19 years, if we stay on pace.

Our area (Washington DC metro area/inside the beltway), is one of the priciest in the country and the population here is expected to DOUBLE in the next 7 years, with no room for new home construction. No matter what happens with our finances (even the worst), we can always rent it out in a heartbeat for well more than our mortgage OR walk away with a big chuck of change, as we just professionally appraised for 185k MORE than what we owe on the mortgage and the sold comps in our neighborhood are typically about 15k even higher than the appraisal price. Houses in our neighborhood stay on the market for an average of 20 days and most get asking price or more/multiple bidders.

Summary: My wife and I patiently waited for a situation EXACTLY like this one and looked at over 100 houses in 18 months, before we found the one that fit ALL of our criteria (because we’re NOT rich, but we live in a very affluent area)……..so we couldn’t be happier. Otherwise, we would still be happy renting rather than making an impulse buy, in a location where prices were too high or a place further outside the city, where the prices wouldn’t hold.

LOCATION, patience and timing folks, no magic or mystery to it at all.

Best of luck!

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