Should I Buy Real Estate or wait?


"Is now a good time to buy real estate?"

The short answer is, "it depends." People are either optimistic or pessimistic about their personal financial life and they are the same way about more macro economic topics like housing and jobs. Each month, surveys are conducted to measure Consumer sentiments to try and get a reading on the likelihood people will purchase in the near future.The topic of real estate is a pretty split camp. There are rational and compelling reasons to be optimistic or pessimistic about housing and it doesn't really matter what part of the country you live in.

Reasons to be pessimistic about real estate

1. House prices are falling in parts of the country. Why buy in a declining market?
2. Cost of ownership on a monthly basis is higher than renting.
3. Taxes and home owners insurance are too high.
4. Prices of homes are too high.
5. Houses take time to sell. With less people being able to buy, it will take even longer.
6. When I will be back in India (Duration in USA)

Reasons to be optimistic about real estate

1. Real estate is a relatively safe investment over the long run.
2. Prices continue to appreciate in 2/3rds of major metro areas.
3. Interest rates are at near historic lows.
4. Buy now while mortgages are still relatively easy to get.
5. Everybody needs a place to live. Why not own it and get the tax break associated with ownership?

The one thing has changed about real estate over the past nine months is Nobody would recommend buying a home without financial reserves. In the recent past, house prices were shooting up so quickly, it was impossible to save enough money fast enough to even out. During this time, getting into a house at any cost was a smart move. Everybody don't believe that same philosophy still holds true.

Experts think 20% appreciation will continue to hold up. It is no longer smart to pay anything to get into a house and it is no longer smart to purchase homes with no financial reserves.If the "credit crunch" we're seeing now turns out to be more than a passing trend, it can have a major impact on the entire economy. It all goes back to whether you're an optimist or a pessimist. Expert believe this will be a lasting trend. Financial markets are resilient and innovative and predict the mortgage of choice for most Americans will soon be FHA. Yes, this subprime backlash will soon be remedied by the most classic of saves, the government bailout.

News said that Washington DC is being strongly lobbied to raise FHA loan limits to match conforming. This means that except in the highest priced States and neighborhoods, FHA loans will be just as competitive and available as any other option. With mortgage insurance and the backing of the US government, there won't be a bank that will be afraid to make this loan and there won't be an investor who won't buy it.

To answer the original question, "Should I buy real estate now?", so It depends on if you have reserves. If you're an optimist, You should have six months of reserves in cash, CDs or savings that will pay all your mortgage and other monthly obligations if you lose your job, or have to make a major repair to the home. Reserves also allow a seller to hold out a maximize their sales price in a less demanding market.

Economic pessimists shouldn't buy unless they have a year of reserves for the same reasons. For everyone else who would someday like to own a home, now is the time to start saving and reducing your debt. With home prices stabilizing, for now the best action you can take is to save money.