Ignore the Headlines

Buyers would be smart to ignore a lot of the scary headlines regarding the condition of the housing market, and also the warnings telling them to wait before buying a home. Why do I say that? If someone is buying a home to live in, there are obvious tax advantages that compel them to buy. But, the biggest point to consider is: how long should a buyer wait before buying? Trying to time the market is futile, and guessing when it will bottom out is just as futile. Consider this. Let’s say a buyer wants to buy once the market drops another 10%. If today the home they want is $500,000, and they put down 20% with a 30 year fixed loan at 5.5%, the monthly P&I payment would be $2,271.16. Waiting a year the house will be only $450,000 but interest rates are likely to be higher; let’s say the rate becomes 6.25%. The payment next year would be $2,216.58 which is an annual savings of $655, but the lost interest deduction on $21,728.96 will easily wipe out any savings. So, tell me again why a buyer should wait?