Are you a buyer sitting on the fence looking at the real estate market and asking the question, “Is now a good time to buy a home, is it safe to buy?” The answer may be yes if you plan on living in the house for the next 5 years or more.
The problem I see is that people have forgotten that a home is a place to live not an investment account! Robert Kiwosaki, real estate mogel and author of the book Rich Dad Poor Dad states that the home we live in is a liability, not an asset, unless of course it is paid off. Thinking that the home you purchase and will live in for the next “x” amount of years is what is going to change your retirement account is a risky strategy. Now I’ll admit I enjoyed the crazy days when my home doubled in value. The only problem was to many people took out our equity lines and we purchased new cars, went on wonderful vacations or purchased that boat that hardly ever gets used. But the basic fact is a home is a place to live and if we follow the normal path of appreciation a home should go up in value at 3-5% per year in a normal market. This is the norm, the real estate market that we had 5-8 years ago was not the norm.
So, does that mean it’s not a good time to buy? NO WAY! Interest rates are at a historic low – meaning money is on sale right now and with all of the bank owned properties on the market and sellers becoming reasonable about their prices – real estate is on sale too! Let me give you an example if your mortgage was for $200,000 at 6.25% on a 30 year fixed mortgage your payment would be $1,232 PI (principal and interest) and you would need to have $3,571 per month of income to qualify for the loan. With the way today’s rates are right now at 4.25%, the same $200,000 loan for a 30 year fixed mortgage would only cost $984 PI and you’d need an income of $3,020. That’s a savings of $248 per month or $2,976 a year! Now take that savings and start your investment account or buy your boat.
So I ask you, can you really afford to sit on the side lines and watch the best time in history to buy a home pass you by or are you going to jump in the game and take advantage of this season before it’s gone?
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