Should You Enter The Housing Market Now?
Many renters are considering whether they should enter the housing market now. June Fletcher, a real estate columnist for the WSJ.com, Susan Wachter, real estate and finance professor at the Wharton School and real estate columnist Elizabeth Razzi all agree that it depends on your individual facts and circumstances.
In no particular order, here are some reasons to buy:
- The government is giving first-time buyers an $8,000 tax credit and made sure lots of mortgage money is available at historically low interest rates. Homeowners also get a mortgage interest deduction and a sizable capital gains exclusion when they sell.
- While no one knows if the market prices have reached the bottom (and many experts don’t so), conventional wisdom is that prices will eventually recover over the long term because of immigration and the creation of new households.
- Your investment is leveraged. If you put down $10,000 on a $100,000 house and its value increases by 10%, you’ve just made $10,000 (of course, assuming that you sell).
- You could have instant equity depending on your local market. If you’ve bought into a stable community with few distressed sales then, your paper profit is the difference between the price you paid and the market price of the neighboring properties. However, if you’ve bought into a neighborhood that has lots of foreclosures, then the foreclosure prices will become the market price and prices will not recover until the foreclosures are sold.
- You can get a fixed rate mortgage whereas your landlord can continue to raise your rent.
- Pride of ownership – you can fix it up; the property is yours to do what you want.