Some people are cautious of buying in a down market where home prices may still be falling

As a Realtor, I expect people to ask me "When is the best time to buy a home?"  But instead, people tend to just TELL me it's NOT the best time! It's just natural, I suppose. Especially if you're thinking about buying in a down real estate market where homes prices seem to continue to fall, or when the media is still having a field day with the economic crisis. You wonder how low the prices will go and whether you should wait, right?  A lot of people are saying, "I don't want to buy a home now, and then find out it's worth less next year."

Should You Buy Right Now?

If you're a seller, you're probably thinking: "You're a Realtor, so of course you would say 'Now is the best time to buy'. It's the only way you'll make a commission!"

· If you are a seller who's thinking about buying, the longer you wait to sell, the value of your home could keep falling.

· If you are a seller who will also buy a new home, calculate what you're saving on the new purchase, and see if it's greater than the loss on the sale.

As an example, let's say your present house is worth $700,000, but because we have a lot of inventory right now, you end up taking $630,000 (10% less than your asking price). You just lost $70,000.

But let's say you purchased this home 5 years ago and paid $350,000. You're still ahead $280,000, less the cost to sell.

Now let's look at your purchase … If you are planning to move up to a $1,000,000 house, you could probably buy that house at that same 10% discount or $900,000. This would mean you had saved $100,000. So you lost $70,000 on the sale of your home, but you saved $100,000 on your next purchase. You're ahead $30,000!

What if you're a first time buyer?

If you don't have a home to sell (or even if you do), your next question should be about interest rates. Are they coming up or coming down? If interest rates are low, and beginning to increase, waiting could cost you more than you would think:

Each 1/2 point increase in your interest rate gives you $25,000 less in purchasing power

Each 1 point increase in your interest rate gives you $50,000 less in purchasing power

Each 2 point increase in your interest rate gives you $100,000 less in purchasing power

So if you put down 20%, here are your principal and interest payments on a typical condo:

$425,000 sales price, at 8.25% interest, your payment is $2,554

$450,000 sales price, at 7.75% interest, your payment is $2,579

$475,000 sales price, at 7.25% interest, your payment is $2,592

$500,000 sales price, at 6.75% interest, your payment is $2,594

The payments are almost identical. However, the home you can afford to buy at 8.25% is $100,000 less than the home you can afford to buy at 6.25%. If you wait for prices to further decline, the interest rates could change everything on your bottom line.

My advice is to look at two factors: 1) How much you can save buy selling low and buying low, and 2) how much you can save by buying now before interest rates go up.

Visit www.GoFindRealEstate.com to do a home search right now!