Buying a Home (The Real Story)

Usually, many people consider if the purchase of a home is a good idea.

The Housing collapse of 2008-2009 is still being felt by many communities today, as a glut of homes remain available for sale at seemingly bargain prices. Further, the spotty real estate market has driven up the cost of rents. Most troubling for the market is the scarcity of younger potential “entry-level” buyers who are either beset by excessive personal debt, or do not want the financial and time commitments to home ownership. Losing this lower rung of the market has created a reverse domino effect to the same.

Many times, younger buyers are presented with a seemingly simple analysis reflecting that one could “own” property more inexpensively compared to by paying rent. The added tax benefit of mortgage interest and property taxes are factored in. However what is never discussed are the costs of maintenance, upkeep and mechanicals, trash removal, insurance, mortgage insurance, and (gulp!), capital improvements such as siding and fencing.  Plus, there are “time vs. money” decisions as to who will mow the lawn and shovel the snow? All of that needs to be considered.

Two axioms also come into play with respect to home ownership. One is the “law of price appreciation,” which was almost a given years ago. Many buyers chased one piece of property, thus driving sale prices up. Now, with fewer buyers in the marketplace, the “buy window theory of life” comes in to play. This is a time-honored rule telling us that the value of a given item is determined by what it can be purchased for on that particular day i.e., its value at the “buy window.” If one cannot sell a given house in a 24-hour period for any given price, guess what that object is worth?

As you can see, buying real property is a complex decision involving many factors. If you have any questions about the same, feel free to contact us.

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