The situation in the housing market has hit people pretty hard. For those of us with long enough memories, this sort of thing seems to happen every once in a while like the plunge in the housing market in the 1970's, the blip in the mid 1980's, and this most recent downturn in the market which, perhaps, impacted more people than in previous episodes because more people were lured into buying houses they couldn't afford with loan products that were downright (financially-speaking) stupid.
Even in light of this and even considering that we recently sold our house and willingly become homeless for at least a year or so while we travel, I would not rule out purchasing a house again. In fact, with house prices so low, now is an excellent time to buy a house if you are ready for one. How do you know if you are ready? Here's how:
- You can pay cash for a house (ideal).
- You can buy a house with a 15 year mortgage, a low interest rate, a good-sized down payment, and payments that will be no more than 25% of your net monthly income.
- You intend to stay in your house for at least ten years or longer.
- The house is located in a good area (good location, good schools, fairly stable housing base meaning not every other home on the block is a foreclosure).
- You have a houseful of kids you are providing for (living in an apartment with a houseful of kids is less than optimal. It's nice not to have to worry about them stomping on the floor, yelling like maniacs, or doing all of the other things that kids do that tend to annoy apartment neighbors).
- You have the means to take care of the upkeep on the home (this means the money to hire projects done or the skill/time/energy to do it yourself).
- You are buying a reasonably-sized home that will suit your current and future needs. I am hoping that the McMansions of the 1990s will become a thing of distant memory. No family consisting of mom, dad, and 2.3 kids needs a 5,000 square foot house! If you buy a house that will fit the kids now but still not be too big for you after the kids move out, you will be set. Also, smaller houses are cheaper to heat, air condition, clean, decorate, and take care of.
- You are buying a house because you really, really want one, not because you are tempted by low payments/low interest rates or someone else tells you it is a good idea.
- You have faith that the market will rebound. No one can tell you what the market will do but historically, the housing market always rebounds although it can take years for that to happen. I tend to have faith that the housing market--and housing prices--will eventually make a turnaround.
- You realize that renting can save you money but you also realize that renting leaves you nothing in the end. Historically the investment potential of buying a house has been a big impetus for people to buy houses and keep them in good condition so that when you retire or want to sell, you will be able to pull a little nest egg from the sale price which will fund your future. Note that that hasn't happened in the last few years since house prices took a nose dive so, again, the buy and hold strategy seems to work best here.
- You aren't buying a house to "flip", you aren't timing the market (no one's crystal ball is that clear!), and you aren't investing and expecting a quick payday. A house can be a good investment but like any investment, there are no guarantees!
Hubby and I have tossed around the idea of buying a new home when we decide where we want to settle down again. I have been a home owner since I was 19 and while it is more work and more expense than renting, I feel that it is, for the most part, well worth the effort and extra money. I also like the feeling of being rooted and the idea that I don't have to answer to anyone about what color I paint the walls or how loud I play my music. We will, of course, take all of the tings above into consideration when we do decide to buy.