Updated 12:30 pm: Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a house or apartment. Additional questions welcomed to email@example.com.
1. To Buy or Not to Buy?
Unless you’ve spent the past year or so living under a rock with spotty Wi-Fi service, it’s safe to say you’ve been bombarded with the message that “right now is a great time to buy a house!” It’s certainly an appealing notion for these recession-fatigued times, but alas, the truth is not so cut-and-dried. Let’s take a closer look at the pros and cons, shall we?
*Historically Low Interest Rates?
The strongest argument in favor of buying would have to be the current extremely favorable mortgage rates. Hovering at around 4% for 30-year loans, they’re the lowest they’ve been in six decades, but are expected to creep back up before the end of the year.
According to Lary Cowart, PhD, assistant professor of Real Estate and Finance at the University of Alabama, one of the biggest mistakes rookie homebuyers make is not grasping the importance of locking in a favorable interest rate. “If rates go up 1 percent, say from 4 to 5 percent, that is a 25 percent increase in the interest rate; so the mortgage payment goes up by more than 10 percent and the amount of house that can be purchased goes down by more than 10 percent,” Coward explains. “People fail to realize that and it is another little thing that will cost them big over the 30-year life of their loan.”
*Home Prices Aren’t Likely to Get Much Lower
In its most recent newsletter, Redfin predicted that “home prices won’t fall or rise much in 2012. Prices can’t rise far before banks and regular home-owners put more properties on the market. And they can’t fall far because of increasing rents and — for now — declining foreclosures.” Find more on the affordability of buying over renting here.
Up next: other reasons to take the plunge, including capital gain exclusion! mortgage interest deductions! equity building!