Waiting to Buy a Home

Q: The real estate market seems to be a mess. Should I wait to buy a home?

A: The constant drumbeat of bad news regarding national real estate trends and subprime lending problems tends to obscure the fact that buying a home is still a very personal decision. For starters, real estate is very local. Some cities are experiencing big declines while others are seeing a much milder downturn. Real estate being hot or cold doesn't change whether buying a home is the right move for you at this time. That point was lost on many buyers in recent years and is haunting them now. It's probably a mistake to buy a house thinking it's a great investment anyway—from 1969 to 1999 the average appreciation for homes exceeded inflation by only slightly more than 1% per year.

Would waiting a year be smart? Maybe. But more important than trying to time the market is making sure you can truly afford it. One quick test: if you can't afford the payments using a traditional 30-year fixed rate mortgage, you probably shouldn't buy the house. Those mortgages aren't always the best choice, but if using one would strap you based on the mortgage payments alone, you're likely to run into trouble when the many "hidden costs" of home ownership raise their ugly head. (See the articles below for more on this pivotal decision.)

• Exhibiting Prudence When Purchasing a House 
• Housing Decisions: Should You Buy or Rent? 
• SMI's Mortgages page

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