Why should I buy a house NOW if prices are still dropping?

Thanks Mel Peterson for inspiring this post.

True Story.

Are prices still declining in my market?  Yes.  If you wait another 6 months to purchase will you still save money?  perhaps not.  Wait, what, how can that be.

Well if the house you want to purchase today is listed for $100,000.  And you could finance that house for 5% interest for thirty years your principle and interest payment would be $536.82  If you add in that you must also now pay for property taxes and insurance which will add approximately $200.00 monthly we are up to $736,82.  And just suppose one major appliance, say the furnace breaks and you have to replace that at a cost of $1500. Total annual housing spending would be $10,341.84 (give or take)

If you are paying $1200./mo in rent for someone else's property mortgage payment, taxes and insurance your landlord replaced a furnace in that same year... he still made $4,058.16 of your money that you could have saved.

Not to mention that if you qualify to itemize on your taxes you will save even more. So continuing to pay rent to a landlord waiting to find the bottom of the market in 6 months, 12 months, two years, hoping that the market will go lower and that maybe interest rates will improve more may cost you money instead.   Be wise and do the math and see if making a purchase would save you money now. 

The bottom of the market may not be for another year or two, but who knows it could also be today.  The problem with "waiting for the bottom" is that you won't know it was the bottom until after things are improving and you can look back and see that it was actually the lowest prices and the lowest interest rates.  Then it will be too late to buy "at" the bottom and how much more will you have wasted in rents? 

The key to saving money is doing the math to see what you can buy vs. what you are paying now in rents.  And I can recommend several really great lenders to help you figure out the best loan program and what you qualify for and then we can begin the search and find the perfect house.

This week I worked with a client who is a renter.  That client will be saving approximately $350 per month by making a purchase and not continuing to pay rents.  Oh and we asked the seller to throw in a home warranty and so if something major breaks, that will less out of pocket money too. 

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Tammy Lankford, Broker/Owner


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Comment balloon 12 commentsTammy Lankford • January 06 2012 04:29PM


I'm happy to be the inspiration for this post Tammy!  And you did a fabulous job quantifying the value in buying versus renting.  Excellent post!

Posted by Melinda (Mel) Peterson, Curator of Happy Endings (Real Estate Cafe LLC) over 3 years ago

I always tell renters "you are already buying a house ... for someone else. Why not buy one for yourself?"

Posted by Cynthia Larsen, Independent Broker Serving Sonoma County, CA (Safe Haven Realty) over 3 years ago

Money is cheap to borrow now if one can qualify for a loan.  If the price of the $100,000 drops to $95,000, but interest goes up to 6% (using your 5% I added another point), the mortage wont' be cheaper, it'll be more expensive. 

Posted by Carla Muss-Jacobs, Principal Broker/Owner, Buyer Focused ~ Buyer Results (BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time) over 3 years ago

Mel- I'd been banging my head on the wall for a couple of days. 

Cynthia- excellent way to state it.

Carla- and there are certainly no guarantees rates will stay low.

Posted by Tammy Lankford, Your Lake Sinclair Expert (706-485-9668) (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 3 years ago

Tammy well said about the bottom....people should buy a home to live in and enjoy the benefits of owning their own home rather then gaming of buying on the bottom. My father bought his house at the top in the mid'70's and sold at the bottom in the'80's and still the value was tripple of what he paid at the "top"

Posted by Endre Barath, Jr., Realtor - Los Angeles Home Sales 310.486.1002 (Berkshire Hathaway HomeServices) over 3 years ago

Hi Tammy, We haven't seen the decline in prices here that some other areas have seen.  Yet our market is a little flat, but steadily improving.  The rental market is very strong... some of these renters need to buy!

Posted by Shirley Parks, Broker, 210-414-0966, San Antonio TX Homes (Sands Realty 210-414-0966) over 3 years ago


Great numbers Tammy and all buyers need to understand the math.  Most do not understand the math and subsequent math of the loss that they have if they wait.  Oh and Suggested

Posted by Larry Story, Total Care Realty, LLC, Greensboro, NC Real Estate (Total Care Realty) over 3 years ago

Well-said, Tammy - a big "suggest" for this one!  The most interesting thing about the question is that no one has a crystal ball to know where the 'bottom' is (and where prices and interest rates are going to go back up)...unless those buyers have some insights we don't know about! :-)

Posted by Karen Hawkins, MBA - Langley & Surrey, BC (Royal Pro Real Estate Network) over 3 years ago

Endre- you know I have no idea what the market was like when my parents last bought in the 70s.  But last year they built a beatiful home that will be in our family for generations.

Shirley- it was slower to hit here, but when it hit, it hit hard.

Larry- out job to make them understand :)  & thanks

Karen- I've made a list of people to call.  You know when I know when it was actually the bottom... I'm gonna call and tell them.

Posted by Tammy Lankford, Your Lake Sinclair Expert (706-485-9668) (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) over 3 years ago

Super post, Tammy.  Suggested.  Also, buyers need to look at interest rates.  If those go up, that may have a much bigger impact vs. the purchase price declining a bit.

Posted by Debbie Gartner, The Flooring Girl - Westchester hardwood flooring (Floor Coverings International - Westchester NY & Lower Fairfield CT) over 3 years ago

Tammy ... Great Blog!  I had this very conversation with a customer just the other day!  I think it also matters what the buyers plans are for the home!  If they have a 20 year gola ... what difference does it make what the price is today!

Posted by Lisa Wetzel, CDPE, SFR carsonvalleyland.com (RE/MAX Realty Affiliates) over 3 years ago

i keep looking in the sky for the plane to fly over with a banner saying that the bottom is here cause people sure seem to think that someone's going to let them know...

Posted by Margie Kopp Sorrell, Lake Oconee Real Estate (Coldwell Banker Lake Oconee Realty and Lake Country) over 3 years ago

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