Why The Time May Be Right for Buying a House
I’ll be thirty-six years old this month, officially closer to forty than thirty. I’ve never owned real estate. Once in a while, someone judges this as a failure on my part, or a reluctance to “grow up” or enter a more sophisticated stage of development, as if maturity was somehow related to the ownership of property. I live in a nice apartment for a good monthly cost, and owning a house in the area where I live would cost more than twice as much to own and have additional maintenance costs.
When I returned to New Jersey thirteen years ago, I never intended to stay in the state. Yet, I’ve spent my adult life here. I’ve had the flexibility to move from sharing a small apartment with three roommates to a comfortable living space. Thirteen years ago, I would never have been able to afford a house of my own, so I don’t regret my choices.
Since my financial situation has improved, I’ve also delayed buying a house. I see buying real estate as a more permanent decision, and I always assumed that I’d be starting a family before making a financial decision whose effects are more permanent. It’s a decision that should be shared in a family; otherwise, I might buy a house today and discover soon that the decision is incompatible with someone else.
From the financial perspective, though, signs point towards making that decision soon, even if it is on my own. Thirteen years ago, I thought that mortgage interest rates were low when real estate values were high, and interest rates were high when values were low. It seems that today’s economy features both low interest rates and low home values. There’s lower demand in real estate now mostly because those who already own are reluctant to sell for a loss, more people like me who are choosing renting over the high cost of buying, and the effects of the wave of new construction throughout the last decade that was intended to supply an ever-growing demand for real estate that never took place.
At the same time, there are more homes being sold for a loss and more foreclosures, keeping the value comparable homes down. The cost of buying and owning a home over 30 years hasn’t changed much, though. Maintenance and improvements cut into an owner’s return on investment. While these expenses are said to be priced into the monthly rent for those who choose not to purchase the home they live in, renting is often the better deal despite the hard work of a real estate agents’ industry group’s attempting to convince the public that it’s better to own. (Whether you’re buying or selling, the timing is supposedly always right.)
This doesn’t change the fact that there is a “nicer” selection of real estate available to buy than there is available to rent. If someone is planning to own at some point in the future, and has the funds available, the coordination of low interest rates mixed with historically low overall prices is the perfect combination. Sellers’ desperation right now, with the lack of demand for real estate, could make it easier to find negotiable deals.
Would you use today’s economy as an opportunity to move from renting to owning a home? Would you wait until your personal life was in the form you’d like before making a financial decision that would effect the next fifteen to thirty years of your life? Is any decision really permanent?
I don’t think today’s economy is a good reason to move from renting to owning. I do think that waiting “until your personal life was in the form you’d like” is something that does not make sense. I think home ownership (like having children) is something where there is no right time to wait for, only times when it would not be appropriate. As long as that inappropriate time is not now for you then i say go ahead if you want.
Flexo, You’re a young man and most likely have lots of time before you make this kind of decision. I feel you are not that comfortable with NJ living. Making a choice that is permanent may be to your disadvantage. Interest rates will be low until 2014 and the market is not finished it’s downward spiral, so you have time.
You do this because you want to, not to fulfill someone else’s expectations. Good luck.
I think the housing market is perfect for people who are looking to buy. But that being said, I would wait until my personal life is right before I commit to a 15 year or 30 year mortgage. There are simply too many things that can go wrong with a commitment like this.
I’m older than you (54) and I haven’t owned a house since 2001, when my now-ex and I left Alaska.
Since I’m not sure where I want to live, I’ve held off even looking for a house. Recently I did have a credit union prequalify me for a loan and I was surprised to see how much I would be able to get if and when.
For now, I prefer the flexibility of not worrying about repairs, taxes, et al. I expect you do, too — and since you’ve always been ambivalent about New Jersey, maybe it’s best that you not anchor yourself just because you’re turning some imagined corner toward maturity. I hear 36 is the new 21. 😉
I think whatever you do, you can find the benefits of having done it. I am glad we’ve continued to rent. We don’t want to be landlords, and we don’t want to lose ownership to the medical system. From where we are standing, that is the biggest benefit to renting. You can’t have it taken away from you. We aren’t multi-millionaires, but think we will do best without having something that can be taken from us. For us, it was a matter of finding an appropriate rental for our needs and wants.
@Mike …and it’s all about the timing. But if you want to live in your home permanently, it is irrelevant.
I tend to hate buying expensive things that don’t appreciate in value so I want to at least wait until I’m reasonably certain I’m getting a good deal. Or at least use as rental income when I purchase my first property. But I’m a long ways a way from that yet. Still need to save up.
My parents bought a house in the mid 90’s it’s worth double what it is now. It’s all about the area.
I am a bit older than you and have not yet bought a house. I have some consumer debt to get rid of and then I am going to aggressively save for a house down payment. I think the market is just right for home ownership, though it won’t be in my future for another 2 or 3 years. If you want to own a home, I would suggest that you do so in the next few years. If you still don’t care to own a home, then I wouldn’t. You don’t want to be saddle with a burden you don’t really want.
I bought a house when I was single and in my twenties. There were times when I felt that the house owned me. It always needed something. That being said, it made me some good money when I sold. I don’t know if that would be true today. I would only buy a house to live in now, not for investment.
We are actually using this opportunity to sell our home (not on open market with deed restrictions) and buy a house on the open market at the post-bubble prices and low mortgage rates.
VERY excited but VERY nervous.
I actually am looking to buy a house–motivated by the factors you mentioned and the realization that I want to stay in this area for the foreseeable future. The housing market where I live (greater DC) has been more stable than a lot of areas, but I still see a lot of great opportunities. And I have the luxury of being able to wait until I find something I really like, as my lease is month-to-month.
If you want to be precise – you were close to 40 than 30 twelve hours and one second after your 35th birthday (there was just 1 leap day in the first 5 years of your 30’s and there will be 2 leap days in the second 5, so the halfway point is 1826.5 days after you turn 30 = 5 years + .5 days).
Housing is a gamble, I bought (in NJ) about 20 months ago, a time that I was fairly sure was close to the bottom. If I got a mortgage today it would be 3.875% rather than the 5% I have, also I don’t think there’s a shot in hell I could even sell my house for what I bought it for (and even at that price point I’d be out closing costs = about 30k).
Refinancing is mostly a wash for me since I’m not sure how long I’m going to stay here and it’s going to take at least a year or two to break even.
Without a doubt though had I waited until now I would have a similar house, for probably 20% less than I paid and with a 20% lower interest rate. Of course it could have gone the other way. I think 2 years ago I didn’t really believe the economy was going to flatline like this. Now I’m fairly sure it’s going to be at least 3 if not 5 years before we see any real growth in the economy.
Thanks for checking my math on that, juggler, and making me feel even older. 🙂
After looking at homes for about 3 years (we still look at listings out of habit), and finding prices still too high, we took a leap to renting a more modern and more expensive apartment. We just made this move on Feb 1st. The costs of living in our old place were such that if someone handed us a home, it would cost us more to live in that home than that rental. Now I suspect that the cost of living in our new apartment would be equal to being given a “free” home, as far as expenses.
There may be some great deals in certain places, but in California, I think home prices are very high. I do know a guy who wanted to buy a home outright, but to be able to do so, he had to move to a much less desirable area. Being a homeowner was important enough to him that he did just that. I don’t envy him, especially since he moved to an even hotter area. Our move was further north and so far it’s felt about 7 degrees cooler.
The effects of a decision can be long lasting, but we don’t have control over everything and life is always subject to change.
I’m thinking that we may never own a home, and that is probably more than okay. I don’t want to move again.
Buying a house is a bit like an anchor. You have to own it for a while for it to make financial sense and that means either living there or renting it out. With economic uncertainty and lack of job security, for somebody who doesn’t have a family and is mobile for job opportunities, owning a home makes less sense.
I am 40, bought a house in 2005 near the peak in a nice suburb of Detroit and moved to Minneapolis 3 years later for a job opportunity. I have been renting the house out ever since It’s difficult to manage a house from far away but the tax benefits are good. Now I live in the Cleveland area, within a 3 hour drive so it’s not that bad but it still takes effort. An older house probably takes more effort.
My boyfriend and i have been lucky. We bought a bare bones house that needed remodeling, spent under $5000 to remodel and we’ve been throwing money at the loan(now granted, the monthly payment was originally under $200) and after only 3 years, we’ve already started paying off the principle. If we stayed in this house and paid the same amount we are now, then we’ll be able to move and rent out our current house. =D
I want to buy a house in the next 2-3 years but there are some things I need to take care of first before I buy a house. I don’t think any decision is ever permanent because nobody knows what will happen the next day especially what happens if you move or get a job transfer. Now is the right time to buy a house. I think it’s going to be another 3-5 years before the housing market is strong again.