Real Estate Q&A
We are trying to weigh the pros and cons of purchasing a new home. We have uncertainties about the economy, but with the low interest rates and home values we realize it may be a very good time to purchase. Beth and I both have stable jobs and have been at those jobs for more than five years, so we do not anticipate leaving the area anytime in the near future. We are currently renting the property we are living in and are very comfortable here and, frankly, like the feeling of not having a mortgage. We have been adding up the money we have spent in the past five years on rent and realize it is starting to pile up and we have nothing to show for it. We are both 30 years old and are really starting to think about our future. Any advice you can offer would help.
— Roger & Elizabeth, Fruita
Roger and Elizabeth,
This is a common dilemma we see with many families right now, to buy or not to buy? It’s a great question and one that should be considered from as many directions as possible, but it sounds like you are on a great path to make an informed decision.
I share your uncertainties about the economy, both nationally and locally. I feel great about Mesa County and our long-term outlook for growth and a growing local economy and also feel like we have weathered the worst part of the storm. The national economy also makes me a bit nervous, we have the same president, but we have many economic issues that are going to be addressed that will impact our future. I believe there is reason for moving cautiously, but not moving fearfully. That being said, I believe it is a great time to buy if you honestly see yourself living in the home for a minimum of three to five years. You have a good, stable job history, thus qualifying should not be a big issue. Make sure you set a budget, go through the process of what your monthly budget is currently and make sure that you put at least 10-15 percent aside as contingency money or tag it for savings (kids?). You want to make sure you have some cushion in your planning, as life often changes and you want to be prepared. Preparation is key to make sure you are staying within your monthly monetary means.
Prices have most likely already hit or are at the bottom and interest rates are at an all time low. Hypothetically — not because I believe it will happen, but to illustrate a point — lets say prices drop 10 percent more where a home that is $200,000 now, becomes $180,0000. Over the same time period the interest rate goes from 3.5 to 4.5 percent, your monthly payment will be higher, even though you waited and purchased the home at a lower price. My point is, if you are confident that you will be staying in the home over the next three to five years, I would suggest purchasing a home. The interest rates we see today will not hold forever, so if you are thinking about a purchase, go for it. Stop paying for someone else’s retirement plan and start putting it toward your own. I still believe that owning your own home should be a major component of your wealth-building portfolio.
I tend to be conservative by nature and say to myself and my team, “lets get through this year and then re-evaluate.” What I have learned after living by this motto year after year is that the upcoming year has nothing to do with what has passed in the previous year, but everything to do with what we make happen in the upcoming year. You may be asking, what is his point? The point is, make an informed decision and regardless of the outcome, how YOU proceed after your decision will likely determine its success. Either buy or rent, but make sure you stop thinking about your future and start making it! Best of luck.
The Kimbrough Team
RE/MAX 4000, Inc