Is it Time to Buy a New Home?

Consistently timing the market is impossible; make your home-buying decisions based on what you want and what you can afford.

You read it everyday in the news: "Real estate values are down! It's a buyer's market!" If that's really the case, why are you and other would-be homebuyers feeling so nervous about buying a new home?

First-time homeowners

Congratulations if you're considering your first home purchase. It's an exciting time for you and a good time to buy, in general. Home values have cooled off, giving you the opportunity to consider and compare many properties that would meet your needs. If you have some reservations about buying in the current market, don't worry-it's perfectly normal.

You might be nervous about buying too soon and paying more than you should. This is a valid concern, but one that should be weighed against the risks of waiting too long to buy. You could end up seeing the home you want pulled off the market or bought by someone else. If you find that perfect home at a price you can afford, it may not be wise to hold out for a better price. As long as you plan to stay in the home for the long-term, any immediate changes in value should even out by the time you're ready to sell.

Existing homeowners

For existing homeowners, the decision to buy is somewhat more complicated. Selling your current home may not be easy. This can become a problem if you find a new home that you just can't pass up. You can try making your purchase offer contingent upon the sale of the existing home, but given the current market, that may not go over well with the seller. If your contingency offer is rejected, you'll need to decide if you can afford to carry both homes temporarily. If you and the bank agree that the answer is yes, you're probably in good shape to put in your offer.

In the meantime, do everything possible to speed up the sale of your existing home. Experts recommend making key upgrades, so that your home is different from the others on the market. Your real estate agent can provide some ideas for minor and major changes that would make the home more saleable.

You might also consider taking out some form of equity financing on the existing home. A home equity loan can fund major upgrades and improvements. A home equity line of credit (HELOC) can pay for minor updates and help you cover expenses if you end up carrying both homes at once.

Remember, in five or 10 years, you might be hearing this: "Real estate values are up! It's a seller's market!" Market conditions might be rough now, but they'll straighten out. And once you're happily settled into a home you love, the state of the market isn't all that important anyway.