Should I buy a house?
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UPDATED: May 17, 2012
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The answer to this question has historically (i.e. the last few years) hinged on intent. Does a borrower just want a house of their own, or are they looking for an investment? Fortunately, the real estate market has hit the point where the answer (in most cases) to both of these situations is an emphatic, “Yes.”
First-Time Buyers and Those Seeking a Principal Residence
For home loan borrowers who simply desire to have a house of their own, for a property to call home, and for the chance to begin rooting themselves into a single location, right now couldn’t be any better of a time to buy a home.
The 30-year fixed-rate mortgage is hovering near historic lows, often dipping below record levels, as we’ve witnesses twice already in the last month. If borrowers can get a home loan at an interest rate of less than 4 percent, they will likely be scoring an amazing deal.
To further encourage this group of buyers, home prices have dropped 34 percent since their peak in 2006. With both interest rates and prices down, the real estate planets have aligned and presented a wonderful opportunity to would-be buyers.
Experts constantly contemplate whether or not we’re at rock bottom, but that’s something we simply cannot and do not know. But rock bottom or not, this confluence of low interest rates and cheap home prices makes it a great time to obtain a home loan and finance the purchase of a principal residence.
But interest rates and home values aside, Jack Otter, author of “Worth it… Not Worth it,” gave a simple but wise piece of advice on Yahoo’s Daily Ticker to would-be buyers interested in turning a home into their principal residence: “Don’t buy a house just ‘cause you think you’re supposed to. Buy a house because you’re going to live in it for a while.”
Investors, Where Real Estate Equals Money
Even investors, whose livelihoods hinge on buying low and selling high, should find today a very favorable time to purchase a home.
Using the same reasoning as above, but with particular emphasis on the historically low interest rates, investors would be wise to finance a home loan and purchase property. Since the 30-year fixed rate mortgage currently sits at levels that we have traditionally associated with the 15-year rate, this is an unprecedented opportunity to invest.
For those who can afford a 15-year home loan, where the interest rate is just taunting us at the 3 percent threshold, the chance to use a home loan in order to flip a property is greater than anything we’ve ever seen before.