Whether you are considering buying your first home, considering buying again after a short sale, or deciding if you should buy after relocating to the San Diego area, the first question buyers should ask themselves is: “Is now the right time for me to buy a home?”
Let’s take a look at both sides of the question.
First, the reasons why it is a good time to buy a home:
1) Home prices are down. Interest rates are still at historic lows. Right now you can lock in to a low interest 30-year mortgage and your payments will not increase as your income rises. Compared to home prices and interest rates back in 2006 and 2007, you can now buy considerably “more home” today for the same amount of money.
We don’t know how soon home prices will begin to rise, but it’s fairly safe to assume that ten years from now, prices will be higher than they are today. Likewise, interest rates will most likely increase as well; even 1% can make a major difference in the size of your house payment.
2) You have to live somewhere. Unless you are staying with family or friends, you will either have to make a house payment or a rent payment. And if you’re paying rent, you’re not only making the house payment for the landlord, you are probably supplying the landlord with a bit of cash flow that exceeds his or her costs. You are essentially making the house payment, paying for the property taxes, insurance, repairs, and maintenance. You might even be paying a rental management firm and giving a landlord some profit.
3) Renting gives you no security and no freedom. Your landlord could decide to sell, go bankrupt, lose the property, or he could just decide he doesn’t like you. In any scenario, you would be forced to move. In addition, your landlord could raise the rent at the end of your current lease period without any warning.
On top of that, you have to live by the landlord’s rules. Your restrictions could be any of the following:
- No pets.
- No smoking.
- No parking your boat on the front lawn.
- No hanging pictures on the walls.
- No changing the paint color in the bathroom.
- No hanging a basketball hoop on the garage.
- No… anything else the landlord wants to forbid.
You also can’t decorate or change the home in any way. So, you have no way to enhance and improve your living conditions beyond just keeping the place clean and tidy.
So, why would now not be a good time to buy?
1) You may want to relocate soon. Now is absolutely the wrong time to buy if there’s a strong possibility that you will not want to stay in the community for the next 3 or 4 years, at least.
2) Prices could still decrease. We do not know for sure if we are at the bottom of the real estate market here in San Diego. We believe that we are on the uptrend, but none of us owns a crystal ball. That means prices could still take another dip in the future. If you’re settled into a home you love and plan on staying until the market recovers, price fluctuations really don’t matter. But, if you want to sell in a year or two, changing market conditions could be bad news.
Even if prices remain stable or rise slightly, you need a few years’ appreciation to offset selling costs. So, if you’re thinking of moving soon, don’t buy a home.
3) Your credit scores are low. You may still be able to buy if your credit scores are low, but you will pay considerably higher interest rates. The best plan is to focus on raising those scores. Then, you can buy after you are in a better position to get good interest rates. The first steps to take to increase your cedit scores are:
- Pay down your outstanding debt
- Make every payment on time
- Read financial websites and learn simple ways to raise your scores
- Save up money for a down payment
4) You have no cash in the bank.
It is possible to buy with little or no cash on hand, but then what? If the furnace breaks or you want to re-carpet the living room, you will have to go into debt. Give yourself a little extra cushion and save up a little more than what you will need for a down payment. Home ownership should add joy to your life – not create a black cloud of worry over your head.
Is now the right time for you to become a homeowner?
If so, give us a call at 858-342-9292. We will be happy to introduce you to lenders who have served our clients well, and we will help you find a home that fits both your budget and your lifestyle. If you prefer to communicate by email, write to us at firstname.lastname@example.org
P.S. If you’re simply curious and want to see what's on the market today, you can search homes for sale in San Diego here.