Is it a good time to buy a house right now?

Discussion in 'After Hours Lounge (Off Topic)' started by Tom_Mack, Jun 6, 2003.

  1. Tom_Mack

    Tom_Mack Stunt Coordinator

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    My wife and I have been looking to move into a single-family home from a townhome. We put a bid on a house, but it dosen't look like it is going to work out because the sellers want a quick settlement (which we can't afford to do) and will not budge much on the price.

    I'm starting to think now about whether it really is a good time to buy a house. Interest rates are so low and our present home has appreciated in value a good deal over the past few years, but so have the homes we are looking at.

    Do homes go down in value when interest rates go up?

    For example, a home was worth $100,000 when you bought it and $200,000 now. Interest rates were at 9.5% then and 5.0% now. If the rates go back up to say around 8% does the value of the home go down to around $150,000?


    Its going to be a huge purchase and I'm just worried about being burned down the road by not knowing all the facts!
     
  2. Angelo.M

    Angelo.M Producer

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    Tom: I'm no expert, but I'm a homeowner. Here's my take.

    This is a good time to buy. Interest rates are low, which gives you significant buying power. Of course, the flip side of that is that home prices are higher. If you equate value with selling price then homes generally increase in value as interest rates go down.

    But, in my experience, homes generally don't lose value the way you describe, they just don't gain it in as large a proportion. As an example: I purchased my first home in 1998, and sold it in 2002. Interest rates were lower when I sold, but my house sold for more (about 20% more) than I paid. I'd say that's a fine return on my investment, despite the fall in interest rates. Of course, regional market pressure will vary, and it is entirely possible to lose money in a home regardless of how interest rates move. In your area of PA, who knows?

    In most situations nowadays, you might be far better off investing in a home than holding your money in a bank, or in the market. Pay close attention to what you're buying and even closer attention to where you're buying (the old saw about location, location, location is true). And, in the current climate, I would error on the side of buying something substantial; you'll kick yourself in 5 years if your house doesn't meet your needs and interest rates head north.

    Good luck.
     
  3. Bryan X

    Bryan X Producer

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  4. DaveF

    DaveF Moderator
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  5. Tom_Mack

    Tom_Mack Stunt Coordinator

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  6. Patrick Larkin

    Patrick Larkin Screenwriter

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    We just bought a new house. We chose new construction for various reasons but some of them are the inflated prices on preowned houses and the short amount of time to make a decision.

    Interest rates are great but the home prices are high. But, if you are selling a house, chances are you will also make more money on your sale to put toward the bloated price on the new house. It all evens out.

    It seems to me that people are selling in droves to buy something new or better. One small house down from me was sold at a really high price. The day that SOLD sign went out, the neighbor put a FOR SALE sign out. People are shocked to see that their $100,000 house can sell for $150,000 now - but you must remember that you'll be paying a higher price on the other end. (This may be made up by the really low interest rates, however - I'm no accountant. [​IMG])

    We bought new construction in April and the base price has gone UP $25,000 since then to buyers of the same model house now. Insanity. That being said, if you buy a $300,000 house, I'd be very surprised to see it depreciate greatly even if interest rates go way up. The more likely scenario is that home prices keep going up up up...
     
  7. Matthew Todd

    Matthew Todd Second Unit

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    Have you considered maybe building a new home? We're just finishing up construction on our first home, and it cost signficantly less to build than the "appraised" value. This way we've been able to get just what we want, at a lower price, although we've had to wait for it (6 1/2 months).

    Matt
     
  8. Michael Reuben

    Michael Reuben Studio Mogul

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    The best advice I ever got about house-buying (or, in my case, apartment-buying) was not to think of it as an investment but as the place you want to call home. It's almost impossible to predict the future of the housing market. The most you can do is concentrate on good locations that are desireable now and can be expected to remain desireable in the future; that's your best hedge against future changes in the economy.

    M.
     
  9. Eric_L

    Eric_L Screenwriter

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    First advice:

    Don't buy a home because you expect it to make money. Buy it because you want to live there.

    That is first and foremost why to buy any given home, because it is the home you want in the place you desire. Just like if you were renting it.

    Never buy a home just because you think you can turn a quick buck.

    Now, interest rates, as I explained in the 'economy' thread are related to the strength of the economy. Not 100%, but close. Therfor if rates go UP it means the economy is good and therefore more people are making enough money to buy homes!

    The primary factor in the value of a home is the cost of the land and the cost of building a comparable home. "Interest rates" rank down somewhere around the same level as "living next door to someone who bakes pie".

    When a home loses value it is often mostly related to the lad value and not the replacement construction costs.

    Therefore, yes, if your life circumstances allow for it, now IS the time to buy. Just remember, it is where you will live - raise children, celebrate holidays, watch Home Theater, relax after work - future profits be damned.

    Typically, you should NOT buy a home if you forsee yourself moving within 3 years, growing your family beyond the # of bedrooms, or changeing employment. Otherwise, get the bigest home in the best location you can afford.

    For some townhouses are the place to be. No yardwork, well kept common areas, ammeneties, etc. Many others prefer the privacy and freedom found in freestanding homes.

    Freestanding homes tend to appreciate more, but that is secondary to your living needs.

    Live where you will be most comfotable.
     
  10. LDfan

    LDfan Supporting Actor

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    The housing market in the DC area is totally out-of-control. A new, good-sized townhouse with a 2 car garage will cost 300-400k. Right down the street there are some fairly new single family homes that just 3 years ago sold brand new for the low 400's. Now they are selling in the 700's.
    My wife and I bought our small townhouse back in 1999 for 142k. We just refinanced and it was appraised for 255k! I just don't see how people can afford huge mortgages. Makes you wonder if the housing market will bust soon.

    Jeff
     
  11. David Preston

    David Preston Supporting Actor

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    If you do buy I don't know if anyone has suggested it but I would go with a 15 years instead of a 30 year. If I not mistaken you gain more equity a lot faster and the payment is not that much more. I had a 30 at first then refinanced to a 15 and payment went up about $60. With a 30 you can pay extra on a house and pay it off quicker but you don't always do it because you don't have to. With a 15 you have to pay that little extra every month. Maybe someone can add to this or correct me if I'm wrong.
     
  12. DaveF

    DaveF Moderator
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  13. Erik_C

    Erik_C Stunt Coordinator

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    It's a great time to buy. I bought a place in DC 2 months ago, and a couple weeks ago, one just like it, in the same neighborhood, sold for $75k more than I bought mine for. The housing market in DC is crazy. I was told to expect my place to double in value every 5-7 years. From first walking through the door with my realtor to signing the papers to buy the place took me about 4 hours. It just so happens that I love living in the place, and it's a great investment. Best of both worlds.
    -Erik
     
  14. GordonL

    GordonL Supporting Actor

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  15. David W Johnson

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    My wife and I just purchased our very first home. We managed to get a 30 year loan with an interest rate of 5.5%.
     
  16. Bryan X

    Bryan X Producer

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  17. DaveF

    DaveF Moderator
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  18. Philip_G

    Philip_G Producer

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    I'm looking at a townhome here locally. The problem is even a townhome runs 180k + so I doubt I can get financing [​IMG]
     
  19. Tom_Mack

    Tom_Mack Stunt Coordinator

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    Thanks for all the replies. Its given me a lot to think about.

     
  20. nolesrule

    nolesrule Producer

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    New homes have higher taxes over similarly appraised existing properties because in most areas the annual tax increase on existing property is limited by county ordinance and/or state law. This limit is usually a smaller percentage than the actual annual rise in property values.
     

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