Saturday, July 05, 2008

Is now a good time to buy?

Is now a good time to buy? This is a question that many buyers, particularly first-time homebuyers, are contemplating. As a decent rule of thumb, if you are planning on owning a property for less than 3 or 4 years, I would not buy right now. In the end, no one has a crystal ball and no one (no matter how many articles you read) will be able to predict what will happen in the next few years. There are too many moving targets (general economy, interest rates, etc.). On the positive side, we are still at a 30 year historical low of interest rates. That makes borrowing money relatively cheap. This, combined with the great tax break from writing off interest, real estate taxes and depreciation, can save you hundreds of dollars a month (or more) in real terms vs. throwing money away on a rental. But, as it costs nearly 3% in closing costs to purchase a property and about 7-7.5% to sell a property (closing costs + agent fees), you will need to recoup about 10% to break even when you sell. Don't buy property for short term gain right now. It probably won't be worth it. Four+ years? You'll probably be ok. Just remember, location, location, location!


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