November 23rd 2011
Go Girl Finance
“How’s the market?” and “Is it a good time to buy?” are questions I am asked frequently by friends, family and clients.
So many people seem to have reservations about the prospect of owning property. But the truth is that real estate is an attainable asset for many, and although it may seem intimidating, with internet savvy and the guidance of an experienced real estate professional, everyone can understand the real estate marketplace and make an educated decision about buying a house.
In the current economic climate, the stock market is fluctuating wildly and we seem to have no control over our portfolios. Under these circumstances, real estate emerges as a financial safe haven, as well as a place to live.
Why Buy a House?
If you find yourself asking, “Should I buy a house?” consider the following reasons why the appeal of ownership has never been stronger:
Currently, in many areas, renting isn’t a great deal because demand for rentals has increased as many buyers wait on the sidelines. This is pushing up rental prices. The best time to buy is always when there is less competition in the marketplace and when you therefore have more negotiability and buying power. When you pay rent, the landlord benefits. When you own, although you pay the initial costs (down payment, and closing costs) you will build your own equity. When planning to purchase, experts recommend a longer term horizon of 5-7 years.
When you rent and your lease term expires, the landlord can raise your rent to unpredictable levels. This is happening now in many markets because rentals are in such high demand. When you own and you have a fixed-rate mortgage (which means that your rate is fixed for the life of the term of the mortgage), your payments are known. Of course you could have the additional cost of upkeep, but typically the big items are predictable enough for you to plan ahead.
Mortgage rates are at historic lows. Right now the 3.875% percent interest rate on a 30-year fixed rate mortgage for a loan amount up to $417,000 and 4.375% for a loan amount up to $2,000,000 are at a low that we have not seen in years! To put it simply, money is cheap to borrow. Again, this translates to more buying power for the purchaser.
Homes are more affordable now and the worst seems to be over. Experts report that inventory is shrinking in many areas. In New York City, where I am a real estate broker, inventory is once again low in several neighborhoods. Prices are stable and even rising in some areas, despite the economy. In this environment, tangible real estate seems more appealing than the stock market.
Ownership gives you satisfaction and comfort. When you rent, you are reluctant to make improvements to the landlord’s property. When you own, you can renovate, remodel the kitchen, paint, and decorate. The improvements are yours and you will benefit from any appreciation, if you should decide to sell.
The Next Step
My recommendation is to work with a real estate professional you trust – one that knows the marketplace and educates you on everything connected with your purchase: neighborhood and surrounding area, pricing, comparable sales, bidding and negotiation process, needed improvements and repairs, contract, loan and closing process, contractors, architects and decorators. A real estate professional will help you navigate the purchase and have a successful buying experience.
Susan Landau Abrams is an Associate Broker at Warburg Realty Partnership in New York City.