5 ways to know when it's the right time to buy a house

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A March headline from a Bloomberg report saw US Home Prices rise almost 9% to the biggest gain in 4 years, to quote:

“Home prices in the U.S. surged 8.8 percent in February 2018 -- the biggest gain in four years -- as buyers battled for an increasingly scarce resource: homes.

While sales were little changed amid the thin inventory, the median price across 172 large metropolitan areas jumped to $285,700, according to a report Thursday from brokerage Redfin Corp. It was the 72nd straight month of year-over-year increases since the market bottomed in 2012.

A strong job market is fueling the price increases even as the number of homes for sale fell 11.4 percent in February from a year earlier -- and as mortgage rates hit four-year highs.” End quote.

A previous month’s headline from the National Association of Realtors, report also noted that existing homes sales declined in January, and have been on a two month decline owing to a tight inventory and surging prices.

And just this week, the news of another interest rate hike by the Feds is expected to almost certainly push mortgage rates closer to the 5 % mark, a figure that was unseen since the 2008 market crash.

The same news quoted “the Fed raised its benchmark federal-funds rate by a quarter percentage point to between 1.5% and 1.75%. That is the sixth quarter-point move since December 2015” and was enough to send the stock market lower owing to the news.

With all these news of instability and uncertainty happening in the broader financial markets that affect Real Estate, is there ever a right time to buy or not buy a house?

Being in the Real Estate industry for almost 22 years now and seeing first hand a couple of booms and bust in that short period, here are my 5 views on whether or not buying a home is practical at this time;

Can you afford the down payment? Can you afford the monthly payments? Do you have enough money left over to cover at least 3 to 6 months of mortgage just in case you were laid off or can’t work?

These are the things a lender will ask or require once they qualify you for a loan. Don’t let the FOMO (Fear of Missing Out) persuade you into buying if you can’t afford it.

Granted that there are first time home buyer programs that provide little or no down payment for eligible buyers, the question will still boil down to affordability.

It’s so easy to get into a house, if you can find one in your price range, so be certain that you don’t end up ‘house rich’ but ‘cash poor’ when going into homeownership.

Here’s a link to LendingTree broker that could help with determining affordability.

It’s a very good idea to be debt free first before buying a house, meaning all consumer debts are paid off. The reason being is that assuming you are living off a monthly budget, and have no debts; you are able to sustain a mortgage payment without having the stress of thinking about other debts.

One of the biggest benefits of owning a home is that it’s one of the best ways to build wealth due to the tax-free advantage up to $500K of capital gain if married or $250K if single. It also provides a hedge against inflation, meaning whatever money you paid in will grow in value over time as inflation rates rise.

By being debt free and not having to worry about stressing over mortgage payments ultimately results in greater financial peace for you and the family.

Heres a link for Every Dollar budgeting app and the widely used money tracker Personal Capital that can help with tracking and paying down debts.

Are you buying long-term or are do you see yourself moving in the near future? Are you buying a starter home or a move up home?

These are questions that you will have to ask yourself when determining your biggest motivation for buying.

Regardless of what the market is doing and if you can afford it, being able to see yourself 5 years down the road is a good measure of whether or not buying now is practical.

For instance, if you foresee yourself having job stability in the current market you’re in, and if the rents are comparably the same or higher than if you were paying a mortgage, then you might have a good case to justify buying a home in the interim since there are benefits to owning versus renting.

Are you planning to have kids or do you currently have school aged kids? Are you currently living in an area where there are good schools? Looking for communities that have good school districts? These factors provide a good indication on whether buying or moving to desirable neighborhoods with good school districts is a good move or not.

Studies show that neighborhoods with good schools are highly coveted and naturally command a higher price premium, but it shouldn’t be the single determining factor for deciding to buy. Other factors that should be considered include safety (crime rate), accessibility to parks and open spaces, noise levels (whether close to airports, freeways, etc.), and walkability.

Do you see yourself living in the home (location) and being happy in it for the long-term? Do you see yourself putting down roots and allowing your family to grow with the neighborhood?

It might be a good idea, before buying in a certain area, to rent there for a month or two and scope out the land if you will, to get a better feel for the neighborhood.

Being the single most substantial purchase of your life, it's always good to experience the neighborhood firsthand before deciding to buy or live there.

Properly doing your due diligence will ultimately save you from the heartache and headache of moving from an unsuitable or worse undesirable home purchase.

Real Estate is one of the biggest life purchases you will ever make. And as such, It is definitely wise to seek help from professionals, friends and even technology to try and take the guesswork out of it.

These 5 tips are by no means absolutes and are meant to help when deciding to buy and live in the home and neighborhood of your dreams.

By being prepared financially, mentally and emotionally to tackle the responsibility of homeownership; will ultimately result in greater peace and prosperity for you and your family's future.

Do you have other tips that can help with home buying decisions? Please leave a comment below or write us a line at thedebtfreejourney@gmail.com.

Until the next post.

Peace and Blessings to you All.