personal finance

Last Friday, I started a book give away.   I have a copy of Spent: Memoirs of a Shopping Addict to give away.  If you missed the post friday, you can learn about how to sign up here.

Currently, there are a lot of people wondering if it’s the right time to buy a home.  They do a lot of fancy talking and throw out lots of numbers and attempt to invoke the emotional side of  your brain in an effort to get you into the housing market.  However, many of the articles fail to consider one thing: No matter if there is a glut of housing stock or the lowest interest rates in 50 years, if you’re not ready or cant afford it, it’s not time for you to buy a home.

So, is it the right time to buy a home?

I just looked up home loan interest rates, and found the following rates for people with good credit scores (700+) and in my state (wyoming) a 15 year note for $300,000 is 3.75%.  This assumes a 20% down payment to avoid paying PMI.   For a 30 year note, the rates are 4.375% with the same parameters as the last one.  There is absolutely no denying what people are saying, that this is a great time to buy a home.  Interest rates are currently the lowest on record (they began tracking in 1971), and one would be wise to take the plunge and get yourself a home, right?

Well, not only are the interest rates the lowest on record, but you have an added bonus of  low prices due to the housing bubble popping and taking the economy down with it.  I’ve heard estimates that there is about a 10 month supply left in the housing market, meaning that if people want/need to sell their house fast, they are going to be dropping prices.  Ten months is a huge supply as you can tell, and  Barry Ritholtz’s blog was picked up by the wall street journal is predicting a price drop in the housing market to help counter the supply and the fact that he thinks prices are still too high.  With the prices expecting to go down, getting ready to buy a home is looking great to more and more people.  Couple that with the buyers market created by the large supply of housing, and you’ve got quite a few good things going for you.  So, it’s the right time to buy a home, right?

Well, I don’t know.  Is It?

What many of those things don’t account for is your situation.  So, you’re not sure if it’s the right time to buy a home.  Here are a few things to think about before you run off to the bank and ink your life away.

1. Do you have a stable employment situation? Maybe your company is doing fine and your star is on the rise inside your company.  If so, that’s great, and you may be ready to buy a home.  But maybe you (or your spouse) is on shaky ground at work.  If you are, that doesnt mean that you absolutely cant buy a home, it just means you should think about whether or not you can make your mortgage payment on the income of the person with the more stable job.
2. Are you ready to be a homeowner? I’ve never owned one, but I hear owning the home is a lot of work.  You can’t just call up the landlord, tell him to fix the water heater anymore and never see the bill if you own your own home.  If your water heater breaks, you’re going to have to get it fixed or get used to cold showers.
3. Are your finances in order? Some of the problems of the housing bubble were not only that people were paying too much interest on their loan, but that they also had crushing levels of other debt.  They had car debt, student loan debt, credit card debt and on and on.  Get your debt to a manageable level before you take on more.
4. Do you plan on moving? This one should be obvious, but if you plan on moving in 2 or 3 years, buying a home may not be the best idea right now.  Consider saving your money and using a larger down payment when you’re settled into a place you have a feeling you’ll stay in longer.
5. Do you know anything about buying a house? Sometimes, the answer to this could be no.  Do your research beforehand.  Figure out how many points you want, which neighborhood you want to live in and how good the schools are, find a bank that you want to handle your loan, find a Realtor to help you search for a house.
6. Know what you want. If you know what you’re looking for in a house and what you’re willing to sacrifice.  Knowing this will make it easy to stick to a budget.
7. Know how much you can spend. This should be an easy one.  Take the worst case scenario that you can picture happening (job loss or something else) and determine the likelihood of that happening.  Figure out how much you’re comfortable spending given your situation.
8. Guesstimate your new bills. Think about this one carefully.  Will you be going into a larger space that will cost more to heat, or moving to something with a larger lawn that requires more water than you are currently using?  Is there a house that may cost a bit more, but has money saving features like great windows, low flow shower heads or some form of passive or active solar energy?

Once again, the personal part of personal finance rears its ugly head.  I’m not saying you need to ignore what the experts are saying about now being a good time to buy a house.  They are right — Provided that you can afford to buy a house, and that you want one.  The nice part about bubbles like this is if you’ve been patient and have a solid amount of savings and good financial habits, you can go somewhere and scoop up a very nice place to live whose price has gone down in by 30% or more in the last 4/5 years.

Remember though, just because market factors are in your favor doesn’t mean you’re ready or able.  Market factors aren’t in your favor when using credit cards, but people still use them  anyways.

As for myself, I’m not ready to buy a house, and I’m not sure when I will be.  I’ve got some higher priorities than that right now (like debt repayment) and i’m fairly confident that when I am ready, the interest rates will still be fairly low.  I say this because after mentioning it to my dad, he mentioned that the first home loan they got was at 17% interest, and they were luck to get that.  All things considered, even paying 6% interest is a steal compared to what we paid to put yesterdays dinner on the credit card.

So, are you planning on buying a home or moving into a new one?

That depends on YOU, your needs, goals and wants.

Here’s some good Yakezie Posts from the last week.

• Luxuries in your budget at Bucksome Boomer
• Starting a Small Business at Narrow Bridge Adventures
• Can you afford the Car? Can you afford the House? at Money Help For Christians

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