Advice For the First Time Home Buyer

January 20, 2006

I've managed to save up roughly $37732 in my bank account, but I'm not sure if I should buy a house or not. Do you think the market is stable or do you think that home prices will decrease by a lot?

That's a great question and one every first time home buyer should ask. I wish we had a crystal ball and could predict the future. We don't, but here's what we do know:

1) The national economy is still expanding with some geographic areas doing better than others. In the DC Metro area jobs are being created at a rapid rate and the predictions are that it will continue to do so for some time (barring some national disaster). Job growth creates housing demand. For the last several years, builders have not been able to keep up with the demand.

2) Average home values in our area have risen nearly 100% in the last 5 to 6 years. It cannot continue that trend because when home ownership becomes less affordable, people quit buying and as a result, prices are forced to moderate simply due to supply and demand.

3) Real estate investing has been red hot (buying and flipping is estimated to be 25% of the current market). The easy money days (we believe) are gone and many investors are trying to get out at what appears to be a market top, inflating inventory.

4) All the "bubble talk" is causing purchasers to be cautious and buying has slowed.

5) Although current mortgage rates are still historically low, they most likely will continue to rise. This will have a moderating effect on the market.

6) The result is a greater supply of homes for sale (inventory).

So, all indicators are that the market will slow, less hysteria, more reasonable housing availability and a more rational market. Prices may decline. The may continue to rise. We don't think it will be extreme in any case.

Here are my final thoughts. Home ownership is part of the American dream, always has been and will continue to be. Over the long range, home prices continue to rise. As in any free market, there are short periods of fluctuation both up and down, but the long term trend is up.

You should want to purchase a home for the right reasons; a place to call your own, your personal sanctuary, your desired lifestyle and maybe your privacy and your ability to make your home an expression of who you are. The other major reason is the obvious tax benefits. I look at it as the government helps us make our house payments because of the interest and property tax deduction.

We always look at a home purchase as an investment. It is basic human nature to do so. On the other hand, buying property is not like buying stock. Companies can evaporate overnight as you know. Property values may go up and down, but you will always own something tangible.

My advice: If you want to own your own home, determine what lifestyle you desire, what you can afford and where you want to be. Then, contact a reputable Realtor® to help you get the best possible deal. This may be a great time to be in the market. There are more choices and sellers are more willing to negotiate.

I hope this is helpful. Send us an email if you want to discuss this offline. Thanks for visiting!

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