Should You Buy a House in Today's Market?

Last month in his newsletter, John Day answered the question, Should you SELL a home in this market? (See our April 7, 2007 blog post.) In John's May newsletter, he talks about Should you BUY a home in this market? (Click the post title to read the full May newsletter.)

First, John says, ask yourself how long you plan to live in the house. If it's less than two years, it rarely pays to move due to the costs associated with selling. Most buyers rely on the gains made from selling their former home to pay for the realtor commissions, down payment and closing costs necessary to buy their new home. In an uncertain market like we have today, John warns, it may take two years or more for a home's value to appreciate enough to cover these costs. The homeowner risks not earning enough on the sale to cover the new buy and winding up with a net loss.

"However, most buyers live in their new home an average of seven years or more," John notes. "If that fits you, it almost always makes sense to buy rather than rent, in practically any market."

There are several compelling reasons to buy a house today, John says:

• It's impossible to "time the market" so you might as well jump in. "Even ... the most knowledgeable experts cannot reliably anticipate the 'bottom' of a real estate market," John explains. So if prices are low like they are today, don't wait too long, gambling that they'll go even lower. They could just as easily start to turn upward.
• "Renting is just throwing money away," John says. As a renter you lose the lucrative tax deductions of owning a home and can't shape your home to your liking. (Yep, you're stuck with the blue shag carpeting and avocado kitchen sink.) Owning a home builds equity. All those monthly payments are, in a manner of speaking, going into your pocket, not your landlord's. And you can make your home your castle, reshaping it to suit the needs and comfort of you and your family.
• Interest rates are at historic lows right now. "If you wait, interest rates could be higher," warns John, and so could your monthly payment. No one can accurately predict what will happen to interest rates and when, but they have started to edge up by minuscule amounts in the past two months and leading economists do expect they to rise.
• "The easiest way to accumulate wealth is through home ownership," reminds John. "Three out of four people have more equity in their home than assets in retirement plans, stocks, mutual funds, and savings." Over time, nearly all homes appreciate in value. In the past five years, the median appreciation rate nationally has been 10% per year.

For valuable information you can use, go to John Day's website to read his free monthly newsletter. You'll find valuable information on buying and selling homes, easy to understand charts tracking the latest trends in the housing market, answers to common real estate questions, even the latest movie reviews. Also check out the Tips section of John's Homes Buy Day website for great information for buyers and sellers gained from John's many years as a top agent for prestigious Long & Foster Realtors. If you're buying or selling a house in Maryland or the Washington DC metro area, John Day is your key to success.