Should I Buy a Home Now?

“I have to say that I do not see the same rapid growth in home prices that we have seen over the last five years, but I think the last five years in real estate was a very unusual period. As I am sure you know, as interest rates go up, the value of real estate tends to go down. This is because as interest rates increase, the payment on the home loan goes up and most people can only afford to spend so much of their income on a house payment.

“If you were to buy a home today for $500,000 with 20% down at a 7% fixed rate loan, your PI payment would be $2,661.21. Even if that property dropped $25,000 in value over the next two years, as interest rates go up, you could buy it for $475,000 with 20% down, with an 8% interest rate and your payments would be $2,788.31 per month. In the more likely event that the price remained flat, as interest rates go up, a $500,000 home with 20% down with an 8% interest rate would have a payment of $2,935.06 per month. And if property goes up by even 3-5% per year it will be harder and harder to buy.

In the short-term, prices may drop slightly, but if you plan on living in a house for five or more years, I believe that your home will increase in value, if for no other reason than the law of supply and demand. The U.S. population is growing but the number of new homes being built is not keeping up with demand, which will invariably drive prices upwards in the long run.

“I know that it may be scary to think about buying right now, but the reality is that you need to realize that real estate has always been a great long-term investment, and that you are going to live in this home as well. So even if you have to sell your home for less than it was worth a year ago, you move up to a nicer home. There is a great psychological value in living in a nice home with enough space for your family. This is, after all, not only an investment, it’s the place you build the most meaningful memories of your life.

As a Realtor I hear stories all the time from people who wish they would have bought or moved up in the past. I cannot ever remember somebody telling me they wish they hadn’t bought that home. I do not know what is going to happen to home prices in the future, but I personally believe that if you take the long-run view, now is still a great time to buy a home. What I have found is that buying a home is always a little scary for most people. I will promise you that I will always give you the best information that I can find about the marketplace.”