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3 Questions You Must Answer When Buying a Home

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. And some of that advice is probably negative. Why buy now with prices still falling? Don’t you realize real estate is no longer a good investment? Don’t you know that people who bought six years ago lost their shirt? We understand the concern your friends and family have. However, let’s look at whether or not now is actually the perfect time to buy a home.

There are three questions you should ask before purchasing in today’s market:

1. What are the experts recommending?

In the last 120 days, many experts have said that buying now makes sense. This list includes: John Talbott, Christopher Thornberg and Warren Buffett.

2. When will I begin to see appreciation if I buy now?

This is a great question. Macro Markets, LLC is a company that studies housing prices. They started their Home Price Expectation Survey in 2010. They ask 100+ housing industry experts to project housing prices through 2016. The most current survey shows that the experts are predicting prices to remain relatively flat in 2012. The experts then project prices to rise reaching a cumulative appreciation of over 10% by 2016.

Purchasing a home today makes great sense from a financial standpoint. Think of the old axiom: you want to buy low and sell high. This decision should not only be a financial one however.

That leads us to our third and final question:

3. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. The Fannie Mae National Housing Survey shows that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the reason you decide to purchase or not.

Bottom Line

Don’t allow money to get in the way of you making the right decision for you and your family. In the long run, the finances will work in your favor anyway.

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3 replies
  1. Melissa Richard
    Melissa Richard says:

    I wish we had the luxury of buying now.  We bought six years ago, and we’re the ones who lost our shirts.  Both my husband and I had solid good-paying jobs, we carefully purchased (didn’t purchase a house too big, didn’t get a ridiculous mortgage we couldn’t afford), but when we both lost our jobs and the value of that home crashed, we were screwed.  We’re going through a short sale now, so we won’t have the luxury of purchasing another home for another ten years or so. : /  Bummer.  We’re going to be renting, and perhaps it will be a relief to have maintenance taken care of (everyone loves the hundreds of dollars to repair a furnace, usually right around Christmastime, right?).  There are SO many aspects to home-ownership that a lot of young people don’t realize.  They budget for the mortgage payment alone and don’t think about taxes, maintenance, insurance, flood insurance (we live at the coast), keeping an ’emergency fund’ in case that furnace, or dishwasher, or hot water heater, or garage door opener, goes kaput and YOU have to fix it.  Home ownership is a BIG deal and while we were financially good for it six years ago, unfortunately, until my husband begins his new job  in a couple of months, we’re not now.  Like I said, I’m OK with renting for a few years…it will be a relief, honestly.

    • King Solomon
      King Solomon says:

      Melissa, thank you for sharing your experience with us and I’m sorry that you’re going through this.  It is important as Realtors to educate our clients on the possibilities and esp having an emergency fund on those super rainy days.  Your post is a great reminder to do so. 

  2. Joe Kucharski
    Joe Kucharski says:

    Number 3 is the only LEGIT question on the list.  First of all you are asking or quoting “industry experts?”  These “experts” are the people that drove us here to begin with.

    If you want to buy a home, buy a home.  Are you going to wait for the market to bottom out?  It bottoms out daily, and all over the country.  It is a buyers market-period.  Interest rates are at a historic low, there is a flood of inventory that is decreasing (good for seller, bad for buyer) so you already have been give an obvious clue.  It’s real simple, however some agents like to make it appear to be very technical and/or requiring analytics.

    Hypothetically, If I were to offer you a home to purchase today for $450k that was last purchased for $500k 4 or 5 years ago (which is unfortunately common in the Naperville,IL market) and you received a 4-4.25% interest rate (vs. the 7% the current owner is holding).  BTW, that equates to almost an $800 difference per month in interest alone, and you don’t want to look at the amortization schedule

    How much are you willing to gamble


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