It seems the argument to buy a home, or not buy a home, is one of the most prevalent topics amongst real estate professionals and bloggers today. I’m not immune to the opinions myself, and I tend to remain relatively neutral on the subject, though if I had some dispensable cash I would be thinking that now may be the time to buy. Having previously written about why it is a good time to jump into the market, I want to use this space to focus on the arguments against jumping into the market…only because my aim is to provide both the points and the counter points to enable a reader to make the most educated decision.
The strongest argument against jumping into the real estate market is that the market has not yet hit the bottom. Sure there is something to be said for realizing when the bottom hits…as most economists suggest that we will not realize the bottom of the market until six months after it has been reached, but today home prices continue to fall in most sectors and there is no sign that prices will be going up anytime soon.
With home prices still on the decline, many people are reluctant to jump for fear that what they buy today at one price will be worth less tomorrow. This leaves people essentially with a high-priced depreciating asset.
If you think the sale is going to end, think again. Most economists believe that the real estate market is in for a flat-line recovery, which means once the market has hit the bottom, the market will remain flat for a period of time while people slowly begin to realize the worst may be over. How long will the flat-line will last is anybody’s guess, but many people will wait on the sidelines not wanting to be the first to jump back into the market.
How about the ability to qualify for the loan? Let’s not forget about the stricter mortgage underwriting standards either. Purchasing a home right now may not even be a possibility Do you have that down payment available? Most lenders these days want at least 20%, which can deplete badly needed cash so critical to most in a recession. Keep in mind that unemployment is still on the rise, so even if you are secure in your job, many people are hesitant to spend their cash reserves for a reason.
Finally, if you are thinking that there is a possibility of a job transfer or a move to a better school district sometime in the next five years or so, it may be best to skip the purchase as well. Unless you are an experienced real estate investor with a history of surviving the cycles of the market, purchasing a home now thinking you can sell it down the road for a profit is a bad reason to take the plunge into the housing market. Even in good markets, most real estate professionals will tell you that the best home to purchase is one that a buyer can commit to owning for at least 10 years.