Monday, April 20, 2009

PRO and CON: Should I Buy a House in 2009?

The real estate industry in this country is in shambles. It has created a great opportunity for any one that can afford to purchase a home. Not only have prices plummeted over the past five years, but both Federal and State agencies are also providing incentives to help taxpayers make the big leap. Although there are plenty of good reasons to buy now, getting into a mortgage during a nation-wide recession might not be in the best interest of every single American. To help those of you trying to decide if you should buy a home this year, I have put together the following list of reasons TO and NOT TO buy a house in 2009.

PRO: Tax Credits

To encourage home buying, the Federal government is offering all taxpayers a one-time tax credit for first-time buyers who purchase a home before the end of 2009. The credit is for $8,000 (or 10% of the sale price), and—unlike last year’s incentive—it is a direct credit and does NOT need to be repaid.

In addition to the Federal tax credit, numerous state and local government agencies are also offering incentives. For example, here in California there is a $10,000 credit for the purchase of a new construction home. The specific rules and amounts will vary by your location, so be sure to ask your agent and/or lender for more information on the incentives you might qualify for.

CON: Prices still dropping

Although some experts predict the economy will begin rebounding at the end of 2009, many are saying that the real estate market will not follow as quickly. Real estate prices are actually still dropping. Financial analysts insist they may continue to drop for another year, which could lower the value of any home you might buy. However, if you are looking to buy a house in the near future, then make sure you do not wait too long. Also, remember that can take months to complete the purchase of a home.

PRO: Population Demographics

Some economists are looking past the economy towards population demographics to predict the housing market. Many believe the "Baby Boomer" generation’s children are beginning to become of-age to purchase homes, which could contribute to the increased activity in real estate industry. Called "Generation Y," they are typically between the ages of 20 and 30, with well paying jobs in the technology field. As the real estate industry begins to bottom out, experts are predicting that Generation Y will begin purchasing homes at a rapid rate.

CON: You may get stuck

If you are the type of person who only wants to occupy their home for a few years or do not like to feel tied down, then now may not be the best time to invest in a new home. The value of any home purchase in the immediate future is likely to depreciate over the next year. Then add in closing costs and agent fees, and you might be stuck unable to sell your home. Remember, that purchasing a house is a big investment, and you may have to hold onto it for five years or so to turn a profit.

PRO: Recession’s End

As I mentioned before, many analysts are predicting that the economy will begin to rebound at the end of this year. Although the real estate market is not expected to bounce back quite as fast, this does mean your chances of getting a loan may increase. When the economy begins to improve more and more banks will feel more comfortable lending, and home loans will become more accessible to Americans again.

CON: Loan Qualification

Getting a loan for a new home is not as easy as it used to be. Banks are lending more than they were six months ago, but they now include harsher credit checks, more paperwork, and un-estimated deadlines. Paired up with ever-dropping prices, this can be a huge incentive to wait another year or so, when loan qualification is supposed to become somewhat easier.

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