WHEN IS THE RIGHT TIME TO BUY A HOME?

I just read an article about the negative affects of buying a home at the wrong time, even if you can afford the down payment and the monthly mortgage.  "High" interest rates have driven down, sort-off, the home prices.  So those who purchased a home before the ' bubble' burst are now underwater . In other wards they owe more than the home is worth.  But, how bad is it to be underwater? Or, how bad is it to purchase a home with interest rates over 6% and maybe going higher?  Let's see. 

We purchased our home in 1973 for about $55,000.  We had a mortgage payment of $309/month.  You may be thinking, how is that a big deal.  Well, think about it.  1973.  I was probably making a little over $100/week.  The mortgage interest rate was over 8%, which was normal for a long period of time. The truth is, mortgage rates that went below 3% in recent memory was unheard of before the new century.  People just got used to it. So, when interest rates doubled it scared a lot of people off from buying a new home.  

The higher interest rates has a double affect, negative and positive.  Negatively, higher payments. Positively, home prices are down. A minus and a plus.  Did you buy a home when they were more expensive?  Don’t feel bad.  Your interest rate was probably 3 or 4%.  A lot lower than now.  You want to buy now?  Prices are lower.

Historically, this is what happens when you buy a home, regardless of the price or interest rate, you are going to see ups and downs in the market.  But, generally, and especially in California, over the years, the prices creep up, and sometimes, by leaps and bounds, as recent years.  For instance, our $55,000 home is now worth upwards of $1,000,000.  It may go down to $800,000 or even lower but, $55,000? Probably not.

Remember too,  when interest rates go down you can refinance at the lower rate and thereby lower you payments.  My daughter did just that more than once and lowered payments, sometimes hundreds of dollars at a time.

In conclusion; if you want to buy a home and can afford the higher interest rates, that are not really that high yet, think seriously of going ahead and doing it.  The value of the home will go up over the years and the interest rates will probably vary over the years and go down to where you can get a better rate and lower your payments. Or, if you purchased a home and it is now ‘underwater, just wait.  It will go the other direction over time.  Real estate property is the best investment you can make, especially in California. Here, it always eventually goes up.

One more point, don’t use your home as a ‘bank’ . That is, taking out loans on your home to buy other things. Cars, boats, etc. maybe if you want to make home improvements but still, be very careful.

If you have questions, don’t hesitate to contact me.  I’m not an expert but we do own 4 homes and a commercial building, so, I have a little bit of ‘street smarts’ in real estate. Maybe I can answer your questions.