Q: Housing prices have been falling for years now. I have a down payment saved, and I can easily afford payments on a nice house, but my question is this: Why shouldn't I keep waiting until prices stop falling? It's not like the stock market where those prices can bounce back quickly in a month or two. It seems that until I see some kind of turn, I might as well wait while house prices keep getting cheaper.
A: Your point about how the housing market contrasts with the stock market is well taken. You probably won't risk seeing home prices bounce 10 percent or more before you can act. But, there are other factors that should deter you from delaying too much:
- Real estate markets are very localized. According to figures from the S&P/Case-Shiller Home Price Indices, home prices continued to decline nationally in the first quarter of 2012. However, at the same time, home prices in seven of 20 major metropolitan areas were rising. Even within a particular metropolitan area, price trends can vary from neighborhood to neighborhood. So, make sure you have a finger on the pulse of the local market that interests you.
- You also risk missing the best mortgage rates of a lifetime. Current mortgage rates are extraordinarily low, so by delaying, you risk missing not just low prices, but low rates as well.
- Buying a house is not an instantaneous process. You point out one important difference between the housing and stock markets, but another difference is that you cannot pull the trigger on buying a house as quickly as you can on buying a stock. By the time you choose a house, compare mortgage quotes, and get approved for a loan, will the deal you want still be available?
The bottom line is, you can't control the market. You can control your finances and which house you choose, so once you have those things figured out, you should get ready to act.