Is 2019 A good time to buy a house?
If you're wondering if 2019 is a good time to buy a house, this is the post for you! Let's take a look at the the risks and possibilities going forward.
With home prices in many areas at all time highs, you may be thinking that it is not a great time to buy a house now because prices are high. Maybe it makes sense to hold out and wait for a pullback in prices. People often make the same reasoning in the stock market, and most financial folks will say something like: Yes, the market may go down, but when will it go down? And how much? They often warn that timing the market is near impossible. Because those variables are hard to predict, it usually makes sense to invest when you can, and let time sort it out. The same applies in housing. I have talked with many people who are worried that the next housing down turn will reduce prices by 20% - as they did the last time - but that is very unlikely. We had both a credit crisis (the banks were under capitalized, and loans weren't scrutinized as credit was too loose) and a deep recession (just missing a depression), which created a once - in- three generations type of economic storm on housing. Today, the banks are probably overcapitalized, and credit remains tight, so a similar scenario is just about impossible. My advice: don't try to time the market, but do what makes sense for you life today.
Home Mortgage Rates
With home mortgage rates still at attractive levels, with many programs under 4.0%, these are good levels for prospective home buyers. Interest rates may go down in the future, but they don't really have far to go, but they can go up a lot higher. Even if you buy today and rates go lower, you may have a chance to re-finance. But in any case, you'll be paying very little interest on all that money you're borrowing. This works also for investors, as the low-rates help make properties generate more cash flow. Bottom line, rates remain attractive, and home buyers should take advantage.
Many people reading this are paying rent. Home prices are not the only things at all time highs, rental rates are also. If you are paying rent, it is probably the number one reason to go buy a home, so you can stop! There are good reasons for renting - maybe you're thinking of relocating, or you're not sure your job will be there in 5 years. But if you aren't planning on moving and have decent job security, you should start working on your financial security, and that starts with home ownership. In many locations, it is cheaper still to own a home then to rent, and that is before we talk about the savings that you get with mortgage payments (see below for more!).
Home Mortgage Programs
Although credit remains tight, there are still many programs that will help reduce your down payment for your first home. Although I recommend putting at least 10% down, as it will qualify you for lower rates (which is good) and not over-leverage yourself to the house, if the choice is between rent and an FHA loan, I choose FHA (which is as low as 3.5%). Remember, any home mortgage payment (that aren't interest only) contains a significant payment to yourself!! Most people that buy a home for the first time forget that the principle that you pay on a home mortgage is money you get back, unlike the interest payment, which goes to the bank, never to return. About 1/3 of your payment is actually to you, and over time those savings really grow, which makes home-ownership one of the more successful forms of savings in the USA. Even though higher leverage loans are more expensive than other loans, they can be easier to pay down, and then you can refinance into a more attractive loan.
Get Good Home Buying Advice
Although it is a good time to buy a home, that doesn't mean *every* home is a good deal. I mean, that is never the case, no matter what market we are in! Some homes have lots of deferred maintenance which can mean extra expenses early, and some homes are in tricky locations that won't be safe places to park your money. I see a significant number of homes sell above where they should, and those home owners are taking on more risk than they might otherwise need to if they take a more educated approach. Buying a home is the most expensive purchase a home owner will often ever make, and it makes sense to get a home expert in your corner so you know what you are buying, and how it should perform in the coming years.