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To Buy or Not To Buy!
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By: Carlos Ramírez
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For a few years now we have been told that we are on what is called a “Buyer’s Market”. We were also told that previous to that we were on what was then called a “Seller’s Market”. What does that mean? When is the best time to buy?
 
Supply and demand basics tell us that when supply (houses) is low and demand (buyers) is high prices will rise. This type of market is what we call a “Seller’s Market”, since there is a strong demand for their offerings.
 
That was the case for several years, where strong housing demand drove up prices at a pace rarely seen. It is hard to pinpoint a specific reason why that happened. But factors like strong immigration, investors moving their money from volatile markets into safer real estate markets and a growing economic outlook all contributed to a strong demand for Real Estate.
 
But for a few years now we have been experiencing what is called a “Buyer’s Market”, where the amount of houses for sale is high relative to the amount of willing buyers. This usually reduces the pace at which houses appreciate or, like in this case, depreciation can occur.
 
So, should we buy now or wait? The answer will depend on your personal needs, but below are a few factors to consider:
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A) Lifestyle. If you are ready to buy your own house and potentially improve your lifestyle you should not wait.  Don’t wait to start creating memories.  Life is too short!
 
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B) Chances are that if you wait until we “hit the bottom” you will end up missing a great chance. The truth is that we can not predict when the bottom will be, and we will only know it after it has passed! By then, prices will have already started to climb, and the owners will be less willing to negotiate.
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If you are waiting for the “bottom” of the buyer’s market, you should know that you are not alone. As a Broker/REALTOR I am in contact with a considerable amount or people waiting for the bottom. The interesting part is that when they realize that the bottom have passed they will all be out buying, creating an unusually high demand that will drive prices up, although this high demand will be temporary.
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C) Even if we assume that houses do not appreciate, you will still be better off buying. The tax advantages, the fact that the payments will stay fix for the life of the loan and the fact that a portion of the payment will go towards the principal will make it worthwhile.
 
Assuming you get a loan for $200,000 at a 6.5% rate, you will end up paying $1,264 per month for principal and interest and most probably under $150 on property taxes and insurance, for a total of $1,414. To that you need to subtract the tax savings you will have of approximately $308 a month (this amount will vary depending on your tax bracket) and the amount that goes to principal, which will average $186 per month the first year. That will leave you with an effective monthly payment of $920. Remember that as time pass by a bigger portion of your payment will go towards the principal, making your effective payments smaller each year.
 
That $920 payment is potentially less than what you will pay for rent on an equivalent property, of course that will depend on what area you live in. If we take into consideration that rent will rise with time and that your effective payment on the house will only decrease as you pay off the principal, it is very easy to see why it is still better to buy - even if we don’t take into account appreciation or the fact that you will live rent free as soon as you pay off your mortgage.
 
Real Estate has long being considered the best investment any individual can make. It can instantly improve your lifestyle while providing security to your future.
 

          
Equal Housing Opportunity