Buy Now or Wait? Mostly the Answer is Personal Preference

I recently read a blog post stating that now is a good time for anyone looking to buy a home and for anyone looking to sell their home that they should sell now. As I read the full post by the author their fundamental argument for selling made sense – over the first half of 2011 home prices are expected to fall – so if you have to sell in the next year or two, now is a good time to do so so you get the max for your home. But as a I read through the buying now explanation I decided that what they were saying needed some further exploration…so here it is. (By the way, may experts are saying the same thing about values and rates.)

• Low Rates




• High Rates




• So Buy Now or Wait?

Low Rates

For buyers who can get a VA loan and take advantage of low va rates then now might be a good time to act – the same is really true for just about every loan program – rates are still great and now is as good a time as any to get a mortgage.

But who knows how long rates are going to stay this low?

Here’s the rub for the current home buyer: if property values go down after you buy your home, you are stuck if you don’t put any money down or if you put very little down. You will also have a higher monthly payment than if you wait 6 months to buy provided interest rates stay the same.

High Rates

But what happens if rates go up (which is the reason this blog post was suggesting buy now)? Well if you take a $290K mortgage now in today’s market Jan 2011 at 4.5% you get a principal and interest payment of 1469/mo. Now let’s look at the same mortgage 6 months from now and after a 20% decline in the price of the house. The amount borrowed is $232K and assume the interest goes up 1% to 5.5% the payment becomes 1317/mo. That’s a significant drop. Seems like an argument to buy later.

Obviously if rates don’t go up and values goes down then waiting is a good option.

Now consider what happens if you decide to wait until property values drop, but they don’t – now what? Well, waiting on the house value to drop that didn’t and rates go up to 5.5% – worse case your payment goes up to: 1646/mo. That’s an increase in around $180/mo. – Seems like an argument to buy now.

So Buy Now or Wait?

So what do you do? Buy now or later? I don’t have an exact answer and I don’t think that there is a clear answer. It may be a lifestyle or life direction choice more than it is a financial one. If you know you are staying put for awhile and a drop in home prices doesn’t bother you, then maybe buying now is an option if rates are going back up. They have come back up since 2010 so it seems to stand that they will continue to go up – but I make no financial or economic basis for this trend analysis or comparison.

Some Things to Consider

If you are unsure of your employment situation over the next few years and you aren’t putting much money down on the home and you don’t have much money to use to pay off the home if you have to sell and are underwater then waiting might be a good option.

There are many angles to consider – its just not that cut and dried as to what you should do if you are a home buyer.

As a home seller it stands to reason that selling now makes sense if you must and can because of the prediction that home values are going to go down in the first part of 2011. And no one is predicting a jump in home prices any time soon. What does all of this point to – a continuation of the buyer’s market for the foreseeable future.