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Buyers Have the Best of Both Worlds

By Brian Kline | May 25, 2015

Buyers may not understand it but now is most likely the best time they will have to buy a home for many years to come. Yes, they would have done better to buy over the past four years while home prices and interest rates were lower but many couldn't qualify for a loan. Today, home prices remain below what they were at the 2005 bubble and interest rates are only slightly above the historic low over the past couple of years. Better yet, loan qualification requirements are easing and those kept out of the loan market because of foreclosures and short sales are again able to qualify for a loan if they've maintained or repaired their credit score.

Now is Still the Time to Buy

Still, many buyers see home prices going up and know that inventory is tight. It leads them to procrastinate about buying a home. It's ill advised for qualified buyers to postpone buying while interest rates remain near record lows and prices continue upward - sometimes at double-digit rates.

Between January 2014 and January 2015, home prices increased an average of about six percent. The house you don't buy today is almost certain to cost more in the future. Nor can you expect interest rates to remain low when the Federal Reserve's official policy is to no to longer artificially suppress interest rates.

First Time Buyers on Red Billboard.

The Argument for Buying Now

You could wait to see if there is another reduction in home prices coming in the future. However, that isn't likely to happen anytime soon. You might wait to buy during winter months which is the off-season but any price reductions will be minor and only a small reduction on the higher prices resulting from the summer selling season.

More importantly, you'll have missed out on the opportunity to build equity between now and when you finally decide to buy. If you take out a $120,000 mortgage today at a four percent interest rate, you will build $4,313 over the next two years. If you continue paying rent over that same two years, you'll have zero in equity.

If you take out the traditional 30-year loan, your monthly payment will be about $573 per month before taxes and insurance. With taxes and insurance, your payment will be about $858. More than likely, you're paying substantially more than that in rent without earning any equity at all. After 10 years, you will have more than $25,000 in paid equity plus all of the appreciation in value that your home earns. You'll be able to buy a better home instead of becoming a first time buyer.

Any increases in purchase prices or interest rates are only going to increase your cost of homeownership. With rents on the rise and purchase prices below recent highs and interest rates near historic lows and your ability to begin building equity, it definitely makes much more sense to buy today than even wait another year in hopes that prices might retreat.

Please leave a comment if this article was helpful or if you have a question.

BioAuthor bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
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