Buy a home?

Question: With interest rates and real estate prices falling, I've begun looking around to buy a home. Some of my friends think this is a fine idea ("It's a buyer's market"); others think it's financially foolish ("Anything you buy now will lose value. It will be at least a year before the market bottoms out.") Where do you come down on this question? Lisa, Greenville, SC

Answer: I'm with you. It's a good time to look. But you have plenty of time. Of course, I have no idea how much lower home prices will go. In most parts of the country there's still downward momentum. I don't know how deep the recession will get and how high the unemployment rate will go. Still, the economic environment says there's no rush.

That said, why not start the process of figuring out the personal finances of homeownership for you? Run the numbers: Is it smarter for you to rent or own? Where is the breakeven point for homeownership? What's your credit score? Do you have 20% or more to put down? How long do you plan on staying in the home since the longer you live there the better the finances work out--and vice versa.

I'd also use this time to explore neighborhoods. What works bets for your lifestyle? A single family home? A condo? Townhouse? Research, plan, and then when the time is right act. It's a buyer's market.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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First of all, I want to get it out in the open, I am a Realtor in Greenville, SC.

Above and beyond what Chris has said, it is very important to know what is going on in your local market. No one should listen to the national media about the housing market, because every market is different. Lisa, I have to assume that you would be looking for a home in the Greater Greenville area, and if so, here's the good news:

1. In 2008, Greenville was the only metro in South Carolina which actually APPRECIATED compared to 2007. The median sale price of a home in the Greenville metro actually increased by 2.4%. Not only that, but the median sale price has not slipped down since 2004, when it fell to $132,000 compared to $132,943 in 2003.

2. The PMI Group Inc. stated in their Winter 2009 Price Risk Index, that Greenville is "at minimal risk for price decline in the next two years."

3. While prices have not declined, the numbers of buyers has due to the elimination of the subprime lending market, a person's inability to sell a home in another location, and buyer's generally think along the same lines as your friends who called you crazy without knowing the facts about our local market. With less buyers, sellers become eager, and there are deals out there.

Greenville is and has been a buyer's market for the 6 years I've been selling real estate. Supply has always outpaced demand, and we never saw the ridiculous appreciation seen in other markets around the country.

If you were a bank, would you be more likely to lend money in a stable market or a market with a high risk of further price decline? The answer is obvious, and that is exactly why we haven't seen lenders restrict as much as they have elsewhere. Buyers with OK credit can still find great loan programs, some of which only require 3-5% down. In fact, many popular areas around the Greenville market still qualify for USDA Rural Development, and they have 100% programs available. The point is that if you have 20% down, great, but you certainly don't need it.

Make the decision for yourself, but I hope I've provided a little insight into our local market conditions.

- Cameron

It's always a good time to buy IF:
It's your dream home in your dream neighborhood,
You will live there for 5 or more years,
You do not have to stretch for financing.

You should love the house and the neighborhood. If you don't, you won't feel happy to stay there, and being happy is the aim.

You should live there 5 or more years, which means you must know beyond a doubt that you will take care of the house (and neighborhood). If you will not put in the time it takes to do this, you will not be happy (nor will your neighbors), and again being happy is the aim.

You should have rock solid finances to afford the house in it's neighborhood. Owning a home is different from renting. And in today's economy, you should have a Very Big Cushion to finance all the things that home ownership requires. Ask a homeowner about the costs, and ask the neighbors about the costs of living in that area. The more you research it, the happier you will be in choosing to buy or pass by a house.

If everything is excellent, than buy. You will be happy.

If she's got 20% to put down and a stable job then I second the notion that she should start shopping.

Go ahead and get pre-approved, then shop around. Make "on the spot" offers far below the list price, negotiate heavily.

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