Thursday, October 2, 2008

When It's Not A Good Time To Buy

The popular refrain, "It's a good time to buy," may be good advice for most consumers some of the time, it's not good advice for all buyers all of the time.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Maybe you should be perched high and hanging tight up there on the fence with the rest of the crows cawing about all the reasons not to buy a home right now.

Renting could be a better deal, but that's your personal decision to make, not your real estate agent, your mortgage broker or your landlord.

Contrary to the popular refrain -- voiced even as aftershocks rumbled through the Loma Prieta, CA epicenter, repeated before Hurricane Katrina's swamp waters receded, and echoed even now as home prices crumble -- it's simply not always a good time for everyone to buy.

The new "Buying Your First Home," (Nolo, $24.99) is 99.9 percent about buying and keeping your home, but not without recognizing conditions that should keep you out of the owner-occupied housing market -- if only temporarily.

For starters, the sheer cost of owner-occupied housing is often overlooked in the finger pointing blame game now being played out as the housing and mortgage markets slip into darkness.

Fast rising prices compelled many buyers to buy before prices zoomed out of sight. Home prices rose an average of more than 50 percent nationwide in the past five years with some states experiencing home price appreciation jumps of 70, 80, 90, 100 percent or more during the same period, according to the former Office of Federal Housing Enterprise Oversight (now the Federal Housing Finance Agency)

While many homeowners today are getting the boot because they were sold on risky mortgages that ended up biting them in the assets, nearly as many simply bit off more than they knew they could truly afford, hoping for appreciation to bail them out.

In 2006, 36.9 percent of all mortgage holders, up from 2005, spent at least 30 percent of their gross income on housing. That means they are living close to their financial edge. One financial shift, say, a lost job, medical emergency, new baby or an interest rate adjustment and they could lose their footing.

Renting could put you on firmer ground.

While you won't enjoy the tax saving and equity gaining benefits of owning a home, a long term lease can let you lock in housing costs at a level you can afford.

Home ownership isn't just getting in, it's staying in by paying insurance, property taxes, maintenance or homeowner association dues, as well as the monthly mortgage and other costs.

Do the math. Learn the true cost of homeownership, from all the costs on the settlement sheet to the cost of driving to work vs. the cost of renting housing near your workplace.

"Buying Your First Home" recommends Rent Vs. Buy calculators available on the; and Web sites as information boosters.

"Buying Your First Home" says you likely won't need to make the calculations and probably shouldn't buy if:

• You plan to move from the area within the next few years. During the last boom, you could buy and sell in six months to a year in many markets and recoup your buying and selling costs and still have enough cash left over to buy again. That's no longer the case in a growing number of markets where home values are evaporating. When the time comes, it's also easier, logistically, to move out of a rental home than a home you own and must sell.

• You are inflexible. Buying is better suited for you when your life is on a steady course. If you are still in your globe-trotting youth and out to see the world, unless you want to also manage house swapping or renting, buy when you've settled down.

• You expect a job change or income reduction. Similarly, if you plan to earn enough money to return to college, become a Hollywood celebrity or join the Las Vegas poker circuit, home ownership probably isn't for you. You can, however, opt to co-own, buy well within your means, say a tiny condo in an affordable community, or use some other affordable home-buying strategy.

• Buying will cost far more than renting. Again, do the math. Some high cost housing markets have gotten so expensive renting makes sense based solely on the mortgage vs. rent difference.

It's a good time to buy when your finances, planning, goals and lifestyle mesh with the financial responsibilities required for home ownership.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's news that really hits home!

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