This is a question that we hear all the time from our clients and the correct answer is it depends on our own personal situation.
When we bought our first California property in 1992 interest rates were at 8.5 percent and everyone told us that we were foolish to buy and that the market was crashing and purchasing a property was a crazy thing to do. Is it not interesting how everyone is an expert on what is we should be doing or not doing with our own lives? Our rent, at the time, was $900/month so in our eyes we were already losing almost $10,000/year (with no tax advantage) and paying another persons mortgage so why not put that money into our own mortgage?
We purchased a condo and lived in it for the next 8 years until we had outgrown the space. When the time came to sell we made a sizable, tax-free profit off the equity that we built and also saved ourselves close to $70,000 that we would have lost due to paying our $900/month rent (and that is based on no increase in our rent over the years).
Would it still have made sense to us to purchase the condo if we had only anticipated living in it for a year or two? Probably not. We, however, were not looking for a property to purchase and flip, we were looking for a property that we could move into and live comfortably in along with building equity as opposed to paying rent.
If you are looking to purchase a property with hopes of selling it in a year or two and turning a profit then no matter when you buy it is a risky investment and not something that we recommend. Real estate, for the most part, is best looked at as a long term investment with a minimum of 5 years holding the property before considering selling. Statistics show that the average family moves every 7 years so 5 years is not too much of a stretch to strive for.
We have clients that have been talking themselves out of buying a home for the last 25 years because they have just never felt like the market was right for them to buy. They did not want to make a bad investment. When we had them add up the amount of money that they had paid in rent over that time period they realized that they had actually lost almost $500,000 out of fear of making a bad real estate investment.
So, is now a good time to buy real estate? Again, it depends on your own circumstance but with interest rates at near historic lows and prices stabilizing it is does not get much better than now to jump in.
By Carla Higgins
Dave and Carla Higgins
Your Real Estate Consultants for Life