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Chadwick: To Buy or Not to Buy—Redux

In last week’s blog, I asked that question and then provided the issues facing a buyer, without supplying a firm answer. So let me directly answer my own question this week.

YES, I say emphatically, now is indeed an excellent time to buy a house in this country. Seldom in the last fifty years has a potential homebuyer been given the opportunity to take advantage simultaneously of both low prices in houses and low mortgage rates.

Under “normal” conditions, when housing prices are weak, it is generally during periods of high interest rates. This is logical because the mortgage interest rate is the key variable in determining the monthly mortgage payment. As interest rates rise, a buyer is forced to “trade down” i.e. find a less expensive house because of the cost of financing. The other side of that coin is true also – during periods of low interest rates, the buyers of houses can afford to pay up somewhat because the cost of financing is advantageous.

However, as I noted last week, these are not “normal” times. The glut of housing is keeping prices exceptionally low despite the extremely favorable interest rates that mortgage seekers can obtain.

For Sale By Owner
Casey Serin
For Sale By Owner

But fair warning - interest rates will not stay at this level forever.

In fact, I believe it would actually benefit the economy to have rates rise somewhat.

(But that’s a discussion for another blog.)

That won’t happen just yet, but the process of finding the right house and getting the paperwork done to get a mortgage can take months and months. The sweet spot for homebuyers is now and it may not last that long.

Getting one’s foot in the door (pun intended) of home ownership is still a worthwhile long term goal. The unfortunate experience of too many homeowners over the last several years is the exception, not the rule. Owning one’s own home is still a legitimate part of the American dream, and the equity built up over twenty to thirty to forty years can be of great value in retirement.

Even if the home available today is not one’s dream house, it can still be a good investment. The “average” home is sold every seven years – we are a country on the move, scaling up and scaling back, depending on our circumstances. In that way, we are different from many other cultures. We are a mobile country. And under normal conditions, and normal conditions will come back again, selling a house is not a difficult transaction.

There is always the “caveat emptor” aspect. Do your homework! Some real estate markets may be so overbuilt that prices are still too high. Shop around and don’t be forced into anything. But get out there and hoof it; drive and walk and talk. Put energy into a search. You are making a long term investment that should serve you well.


Patricia W. Chadwick has had more than 35 years of investment experience. She is the founder and president of Ravengate Partners LLC, a consulting firm that provides advice on financial markets and global economics.