Best time to buy might be ending

By John Adams

For the AJC

I heard this week from a young couple wanting help. Thinking about buying their first home, they wondered whether they should just wait until next spring.

They had listed the pros and cons of buying a house now and couldn’t come to a decision.

On the “wait and see” side, these points were made:

● Home prices in metro Atlanta could keep declining.

● Interest rates may stay low for some time, and inflation is not a major factor now.

● More foreclosures are a possibility in the coming months, and that could flood the market with bargain houses.

● It is harder to get qualified for a new loan today than it was several years ago.

On the plus side, they had listed the following reasons to take action now:

● The interest rates on 30-year fixed-rate loans are less than 6 percent, and that could change.

● They had saved enough to make a 20 percent down payment, eliminating the need for private mortgage insurance.

● There is a large supply of homes available to choose from, and sellers who hope to sell are more flexible than in years past.

● The federal tax credit of $8,000 for qualifying first-time home buyers is set to expire at midnight Nov. 30, and as of this writing, no extension has been approved.

As I looked over their list, I agreed that they had done their homework.

All their points are legitimate, and all are reasonable. But I added that there is one factor they overlooked, and that is the issue of time.

One of the key points in any home-buying decision is answering the question: How long do you intend to own this house? The answer affects several aspects in the decision-making process.

For starters, the tax credit rules require that you own and occupy the house for at least three years. Anything shorter would require you to repay the entire amount as additional income tax.

Beyond that, the longer you own your home the greater the likelihood that replacing it will cost you more, both in terms of price and interest rate.

Finally, the prospect of values declining for three more years defies historical norms. In fact, prices appear to have stabilized.

My advice was this: If you can find the home you want and get it closed by Nov. 30, you will likely be glad you did.

John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more real estate information or to make a comment, visit www.money99.com.