According to the media, now is the perfect time to buy a house. Or –wait a minute—wasn’t 2010 the perfect time to buy a house because prices were so ridiculously low and interest rates were low too? No, no, no, 2005 was the perfect time to buy a house, because if you waited any longer, you were most certainly going to be priced out because prices only increase—they never come down.
While housing prices may be free from the laws of gravity (what goes up, must come down), they are not free from the laws of economics. No matter how secure the housing market seemed in 2005, and how everyone was jumping on the housing wagon because prices were skyrocketing, we all know now that it was just one big bubble that eventually had to be popped.
With current prices creeping up once again, the anxiety starts to set in: is now the right time to buy a home?
My husband and I married in 2010, and for the past three years, we’ve been working on decreasing our debt, increasing our income, and creating a financially balanced life. We struggled a lot, but we’ve made great progress as well. Our debt has decreased from $40,000 to $16,000 (only student loans left!) and our income has increased more than 30% in the past three years.
But still, when paying off debt and creating a savings fund becomes a top priority, that leaves little room to save up for a down payment. Just recently, we decided to shift our priorities. While I’m still plugging away at my student loans, we’ve also upped our commitment to saving up for a down payment.
However, we’ve come to a few conclusions when it comes to buying a house. While it may be tempting to overwhelm ourselves and jump into a mortgage now because a) prices are only increasing and b) interest rates are so low, the fact of the matter is: the best time to buy a home is when you’re financially and emotionally ready.
Just like any other investment, there will always be ups and downs in weathering the housing market. Prices will go up, interest rates will go up, and eventually they’ll go down again. There is no sense in rushing to buy a home when you’re not ready to weather that financial rollercoaster.
As a homeowner, you not only become responsible for a mortgage, but you also become responsible for homeowner’s insurance, property taxes, and anything that gets broken that now requires fixing.
While we would love to become homeowners and take advantage of the low interest rates, deep down we know that we’re just not financially prepared to take that step. Hopefully we can become homeowners soon, but until then, we’ll just keep plugging away and saving for our down payment.
What do you think? When is the right time to buy a home?