Buy Your Dream House Now
Buy Your Dream House Now
Since last summer, the frenzy of the real estate market quieted down to a point that many people assume that the market will fall into a new low in years. Looking back at the terrible crash of the real estate market in the early 90’s, most of us still feel its residual effect in the economy. However, till now, the market is still going strong—the values of residential homes are going up steadily—which puts many people in awe. At this moment in time, many buyers are hesitating in buying their dream house; think that maybe the prices will go down soon.
With the stock market going up and down with the war against Iraq, the effect of war overshadows the real estate market as well. Many are afraid that once the war breaks out, the U.S. economy will break down accordingly.
However, the outcome is probably just the opposite. Let’s take a look of American history: is there a time in our history that a war caused us economical difficulty?
The answer is Never!
In fact, it happens that every time our country declare war on others, our economy were deeply into or just falling into a depression. The outcomes of wars in our history, proved that the war actually brought prosperity due to the increasing need of military need and in return boost the economy with a shoot of energy. War brought weak countries great tragedies of starvation, death and economical setback, but always brought super strong countries more resource, power, and economical advantages.
Put aside the uncertainty of politics and war, when we just look at the real estate market from the economical aspect—now is a good time to buy houses.
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Real estate is a long-term investment. It’s up and downs spreads over a long period of time. There is no possible way to speculate exactly when it’s rising and then it’s crashing, and therefore, you really can’t wait. |
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When the prices are low on houses, that means the whole economy is at its low point, too. At times like this the unemployment rate rises, the consumer power decreases, and people are afraid to buy properties even though price is low, tomorrow it might be lower. You never know when you can see the money that you put into the house if you buy it. |
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Last year the prices of houses rose about 20.4%. It’s a lot steadier this year; scholars speculate that the rise would still be about 7%. In the long term, the average growth should be around 5%. When the growth is 5%, you are actually making 25% in profit. For example, if you purchased a house for $500,000. After a year, the price grows 5%, and you made a profit of $25,000. If your down pay was 20%=$100,000, with a $25,000 profit, then your profit margin is actually 25%. |
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When you own a house you have to pay the mortgage and the property taxes. But a good thing is that the interest that you pay in the loan and all your property taxes can be deducted in your personal income taxes. In the first ten years of the loan, most of the payment that you pay goes to pay the interest, so most of that can deducted. After the first ten years, you start to pay the principal. As the percentage of the principal increased yearly, the less you can deduct from your taxes. |
A client of mine looked at a couple of houses in 2001. He did not buy a house because he thought the prices were too high. In 2002, the prices of houses 
went skyrocketing, and of course, he didn’t buy any house. In 2003, the prices grew more stable, but he is now afraid to buy a house think that the prices might drop, and also because that the amount of down payment that he prepared to buy a home in 2000 is not enough anymore in 2003. From this example, I want to give the readers some honest suggestions:
When you have enough money to buy a first house, buy it! Generally, the down payment is 20% of the house value. If you have $50,000, you can buy a house of $250,000, if you have $80,000, buy a $400,000 house. Once you saved up enough for down payment, buy a house, doesn’t matter it’s smaller than what you really, really want. The reason is because once you have your first house, it’s so much easier to up grade. Imagine this, you have your own home; you can live there as long as you want. You don’t have to worry about the inflation, rise of the rent, the change in the market…If you have a $250,000 house, which grew 5% a year, then in two years, you will profit $25,000. Your original investment on the down pay was $50,000. Now add the two together and you have $75,000 to buy a $375,000 house. But if you don’t have your first house, it’s hard to save up $75,000 for most blue-collar class.
Buy what you can afford. Some homebuyers expect to buy their ultimate dream house as their very first house. It’s very hard to save enough money to buy an expensive house unless you have a really high income. The speed of you saving money can never catch up to the speed of the house rising in price. After your first home, it’s so easy to move up to bigger, more expensive home.
Of course you can rent, but to buy a house is to buy a home…when you rent, you can’t do to many changes to the place you rent. You don’t have the sense of belongings at the place you rent. But when you own your own house, you can decorate any way you like, you can make improvements, and make it into your cozy home which will bring you good feelings of family, living, safely, and great satisfactions in your life.
Even if you can foretell that the real estate will go down in two years, and you don’t want to buy a house this year…but what about next year? What if it goes even lower the year after? And is it really worth it to give up the feeling of owning your home?
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