I want to buy a single family house around $600,000 and my friends keep telling me housing market will go down

Asked by Bahareh, Virginia Sun Sep 16, 2007

I want to buy a single family house around $600,000 and my friends keep telling me housing market will go down more. Cheapest rental in area is $2500 per month. Should I consider renting for two years or just go ahead and buy a house which can give me tax deduction too. my intention is to live there for at least 8 or 10 years. if I rent, I will pay minimum $30,000 a year for rent. How far you think housing market will go down in this area?

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Jeff Jones’ answer
Jeff Jones, , McLean, VA
Fri Jul 26, 2013
Bahareh, I have to agree with the rest of the posts below. Interest rates are still very low, and depending on your financial situation, buying can be much cheaper than renting, especially if you plan on staying in the place for 8-10 years. It doesn't sound like your friends are in the real estate business, which tends to lead to bad advice. Would you listen to your doctor about legal advice?

Going off the basic principal of buy low, sell high, why would you wait until prices have appreciated to purchase a home? My advice would be to talk to a real estate professional about your goals and they can help you determine what would work best for you.

Jeff Jones
Long and Foster
310.897.4497
jeffrey.jones@longandfoster.com
1 vote
Monica Murphy, , Potomac Falls, VA
Sun Sep 16, 2007
I am not a real estate agent, so I can't/won't make a forecast on housing prices. Nor am I an ecomomist, but I will make a forecast on interest rates :-) I think what we are seeing right now with the fed lowering interest rates to calm the turbulence in the financial markets is more important to you than the cost of the home.

The fed is on a temporary mission to inject liquidity and pump some growth into the economy to counteract loses that are looming with sub-prime mortgages. This temporary lowering of interest rates gives you a great window to buy.

With your time horizon of 8 to 10 years, getting a lower interest rate is far more important than the relative price of the home. The lower interest rates available today will provide you with a lower total cost of ownership in the long run. Historically, interest rates are still very low. The fed's actions today are temporary (in my view) and my crystal ball says they will have to do a dramatic about-face in the future to slow down inflation and salvage the value of the dollar. Oh, inflation...not only will your total cost of ownership be lower if you buy today, but if inflation takes off, you definitely want to own. Inflation will drive up the price of homes.

Just one home stager's opinion.

Monica Murphy
Preferred Staging
5 votes
Mr.P, , Arizona
Sun Sep 16, 2007
Is Ragh one of your friends?
3 votes
Phil Doherty, , vVirginia
Sat Sep 22, 2007
I am a real estate agent and I would like to know when was the last time a real estate agent told you not to buy a house. Let's get real. Of course there are times when you should not buy. Two years ago was not a good time to buy. Houses have--in most areas -depreciated by 10-20%and it would have been better to have waited.
Rita, the real estate agent, makes a couple of ridiculous assertions: 1)"The nice thing about buying is that you get to live there". What do you do if you rent? Let somebody else live there? 2) "Presumably the neighborhood for a rental would be less desirable than where you would purchase". How ridiculous!!! I live 15 minute from the White House and if you buy in Georgetown or rent in Georgetown you have the same neighborhood. 3. Rita believes that if the Democrats win in November 2008 there would be a huge turnover in properties that would cause house prices in the DC area to decline. Again, a ridiculous assumption that has been disproven countless times. First, the number of people moving out would be miniscule and would be offset by the number of people moving in---not to mention the benefits of having a new administration. No one knows what will happen. Flip a coin. Phil
2 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Sun Sep 16, 2007
Excellent points from Monica. No offense to your friends, but they are just regurgitating what they have heard from the media. There is a very real possibility that many local markets will soften a bit more before they get better ... or things might turn around tomorrow. These are probably the same friends who thought that things would keep riding high forever back when the market was booming. Assess your own long term plans, and make the move that is right for you. If you are worried about further market degradation, simply hold out for the best value you can find to help insulate yourself. No one can predict the future, but the one thing I know is that market factors have made it an ideal time to buy in many locales. Low (and possibly lowering) interest rates and a surplus of inventory puts a buyer in a very strong position. The smart money buys when everyone else is trying to sell.
2 votes
Kelly Putz, Agent, Fairfax, VA
Sun Jul 31, 2011
Well, Bahareh, I hope you waited and bought sometime in the last two years, as you asked this question back in 2007 before the bubble popped! Yes, the market DID go down for the rest of the country, but not so much in the DC market. In fact, in the last year while the rest of the country has had an even larger downturn, the metro DC market has actually gone up and we even saw bidding wars again this spring.

As to what Rita had to say, well she works in Massachusetts....not DC, Virginia or Maryland.
1 vote
Elliott R. O…, Agent, McLean, VA
Thu Jan 6, 2011
I have been a lender over 13 years and the best thing I can tell you is stop listening to your friends. I love my friends but I the majority of them don't know squat about mortgage or real estate trends and if they did I still wouldn't listen to them because they are not paying my bills anyway.

One of the most important things I have learned in this business is that the best house for you is the one YOU want. Not what your friends, co-workers or relatives think you need. You have to live in the house and you have to pay for it so make sure it makes YOU happy first and foremost; forget everyone else.

That being said real estate values and mortgage rates always fluctuate.

Sit down with an agent familiar with the area you are interested and have them show what the trends are and get the best information possible so you can decide for yourself. If you plan on living in the home for 8 to 10 years it may be worth it to buy but it's hard to say for sure without more information.

If you want more information on the mortgage aspect give me a call.

Elliott R. Oliva
Mortgage Planner
NMLS #353884
202-681-1636 direct
eoliva@envoymtg.com
1 vote
Julio Ferrei…, , Dallas, TX
Mon Oct 1, 2007
The secret is finding a property with equity in it. The better you buy, the safer you are. There are foreclosures and short sales in every bracket of the market - even $600K homes - . Find a realtor who is also an investor. Go to investment clubs in your area. RESEARCH!!
1 vote
Ruthless, , 60558
Mon Sep 17, 2007
I decided to make two posts because if others disagree with this one or think it is too far off topic, I can delete it.

To Bahareh's fearful friends and Ragh:
Who benefited/benefits from the "sky is falling" nay sayers that say, take your money and run. This fear reaction is what caused/causes a "run on banks". If everyone would calm down everything would work out BETTER than the results of a panic. Remember, the greater the risk the greater the reward. Those who buy stock when everyone else panics, buy at incredibly low prices and when calm occurs they make money. Their risk however is that sometimes the panic will go too far and everything collapses. But if they bought for pennies on the dollar and the sellers lost $.95, who really lost more? With a home, if the panic gets so bad that everything collapses, wouldn't you rather be in a home? A foreclosure can happen to the person you are renting from too. If you don't over extend yourself, what is the downside if your home does drop in value? How would you be any more protected by being a renter or putting your money in other investments that have unknown outcomes as well?

Just my opinion. Please give me a thumbs down if you disagree.
Ruth
1 vote
Ruthless, , 60558
Mon Sep 17, 2007
Bahareh:
You have received some of the best advice I have read on this forum. I've been here over a month trying to off set the bias that Ragh talks about and in this case he is the one who is wrong. There is no better long term investment than your own home for all the reasons people have said below. Not only should you take the advice of Real Estate PROFESSIONALS (because who knows better?) but you should also take the professional advice of an accountant. I'm impressed with Monica's first response and she is not an agent.

I'd re-read all of the answers several times and talk to YOUR professionals about each of them.
Good luck
Ruth
1 vote
ian cockburn, Agent, New Orleans, LA
Sun Sep 16, 2007
First of all only take advice from professionals who know the current market in your area...these are the only opinions you should consider...they should include non-objective people such as mortgage brokers, the courthouse, (to see what has been selling and for how much) and check to see what sales really are.
If you are looking at 8 to 10 yrs, run a spreadsheet out for this time period...with one scenario for renting for two yrs, then buying, or buying now....assuming prices of houses will stay the same. Then do a spreadsheet that assumes the market will drop 30% for 5 yrs, then starts going back up 5% per yr.

With the 2nd spreadsheet, vary the dropping market based on what is actually happening in your area...if it is actually dropping.

By running the numbers on a spreadsheet, you can get a better idea of the best way to manage your risk, and as such make a more educated decision without opinions, and more basis on facts.
Web Reference:  http://www.iansellsnola.com
1 vote
Ragh, Home Buyer, Greenville, NC
Sun Sep 16, 2007
Do not buy a home in this falling market. Those who advise you to buy a home in this falling market is real estate professionals. Do not take advise from realtors, lenders. They are running out of business these days. I have been following Wilmington area real estate for last few months. Wilmington area saw about 50% price increase from 2002-2005. Last 1-1.5 yars prices steadied out and is coming down. The current prices are still inflated will still come down. According to current sale pitch, Wilmington has over 9 months of inventory in teh market. It is keep rising. Average day a house in the market is over 40 days. Frankly houses in 200-400 K are the only one selling. Houses priced above 450K is there for ever. I see samll changes in prices (20-30K) for a 450K house. Even in dsireable areas like Hochessin, Greenville see a huge invenotry and regular price reductions every 10-20 days. Have your cash invetsed some where, when things get into normal you will be in a better position to buy.

I advise you to read this article before you take any decision.

http://patrick.net/housing/crash.html

Good luck
AR
1 vote
The Hagley G…, Agent, Pleasanton, CA
Sun Sep 16, 2007
Also keep in mind the tax benefits you get from owning a home...this in addition to all of the other great points made below point to home ownership.

I am curious about the friends advising you/. Are they home owners/investors? How is their financial portfolio Talk to you tax proffessional......I am confident that advice you get from the pros all point to home ownership. Good luck - it's a great time to buy real estate!
Web Reference:  http://www.cindihagley.com
1 vote
Sylvia Barry,…, Agent, Marin, CA
Sun Sep 16, 2007
Hi Bahareh:

Both Paul and Monica make great points.

One thing about buying real estate or stock or whatever other investments - they are mostly hindsight - it is very difficult to time the market and you will never really know when is the height of the market or the lowest point of the market.

The good thing about houses is that they are real estate - meaning that they are something you can hold on to and eventually profit from it if not immediately. Supply and demand is what drive evereything along with other external influences (such as the lending industry woe). There is only so much land that can be build on and the housing price will go up, especially since you will be there for 8 to 10 years.

From your question, sounds like you want to settle down but worry about it because of your friends' advise. Your friends might have good intentions adn want to give you advise thinking they are trying to help, but they are not YOU. YOU have your own needs and wants and your own long term plan.

I rented many times before due to my husband''s job assignments (we moved every two years). I could not wait to settle down, get a house of my owne, be able to decorate, paint, upgrade, plant trees/flowers that I like, basically, I wanted to have a home of my own; and that means a lot!

As you sais you'd pay minimum $30,000 a year to somebody else without the advantage of tax write offl. In the mean time you will be paying down the principle of the house and builing equity.

I think your best bet is to find the best value in the best location you can afford.

Try not to buy the most expensive house on the block (or the comparable area) but one that have potential to grow easily. If you are willing, a house that has great floor floor plan, potention for expantion if needed, and something might need upgrade which you can do when time is right. As this is the buyers market, don't be shy to negotiate if you and your Realtor think it is justifiable for the area.

When you get your loan, make sure it does not have prepayment penalty. If the rate is great then lock it in.

Take your time to find the right house, then enjoy your own home.

Sylvia

.
1 vote
Amira Alfa, Agent, Germantown, MD
Mon Aug 1, 2011
Best market to buy in right now!
prices are beginning to climb, and rates are beginning to rise also so its best to get the properties now while they are still at very good price points.
The media/news are a reflection of the nationwide market, which is far more devastating than the local area, but the local MD/DC/VA market is very strong right now, possibly the strongest in the nation, alongside NY.
Many properties with equity--- many shortsale/forclosed homes that would be great deals- Feel free to contact me for more information on the area. amira@a-krealestate.com 301-755-8860

Best of Luck!

Amira
0 votes
Elliott R. O…, Agent, McLean, VA
Mon Aug 1, 2011
Don't ever listen to your plumber's advice on brain surgery.
0 votes
MaryAnn Demp…, Agent, Norton, MA
Thu Jan 6, 2011
Here it is; the home prices are predicted to start going up, slightly in 2011, interest rates are predicted to maintain, but will flectuate somewhat in 2011, so if you wait, what better deal could you possibly get in two years. I don't see one. How can a non-realtor tell you about the market, if there not selling in the market. That would be like me giving advice on your type of employement, when I have nothing to do with it. My suggestion, buy now and dont wait.
I have great referral for you, if you need on from the number one company, Keller Williams Realty.
0 votes
ian cockburn, Agent, New Orleans, LA
Mon Oct 1, 2007
Unless your friends are Realtors or mortgage brokers, I would be wary of armchair professionals who base their real estate knowledge on the evening news.

If you are going to live in Fairfax County for the next 8 - 10 years, you will make it through any cycle that may be there, percieved or otherwise. Unless immigrants stop migrating to DC tommorrow morning, and all of Washington shuts down this afternoon, the market where you are will remain strong relative to alot of other parts of the country.

No one can really tell how far any market will go up or down..but you can set yourself a basis for your level of risk versus buying or renting...for simply renting is also a risk.
Web Reference:  http://www.iansellsnola.com
0 votes
Yvette Parker, Home Seller, Mount Vernon, VA
Mon Oct 1, 2007
I am selling a 4 br 2 1/2 bath all brick Colonial 2-car garage and will be able to move in December 2007. I am selling for $550,000. New 30-year Certainteed roof and new HVAC system. Home in Mt. Vernon area, excellent neighborhood, great schools, near parkway.
0 votes
Paul Hunter, Agent, Chantilly, VA
Mon Sep 24, 2007
If you are planning to spend 8-10 years in this residence, then you shouldn't have anything to worry about. No one can tell you exactly what the market will do in the future, but you can look at history to predict what it may do. Over the last 30 years, the Northern Virginia housing market has gone up 7.9% a year on average. Of course there are times that it dips down and times it spikes up but over the long haul, it does go up. Assuming this same level of documented appreciation, your $600K house will almost double in value in 10 years time. That's a pretty good reason to buy and enjoy where you live for as long as you'll be here.
0 votes
Rita Thieme, , Upton, MA
Mon Sep 17, 2007
Buy! For sure!

See the benefit of buying is that you get to live there! Presumably the neighborhood for a rental would be less desirable than one where you would pruchase?

Even if property values decline, over time they would increase. By buying now, you will get yourself settled, you will begin to enjoy the pleasure of home ownership, you will get to know the neighbors. And yes, you will enjoy the tax writeoff.

The only reason I can see to wait would be the area you live in.... IF the Democrats were to win the White House there will be a huge turnover in properties in the general Washington DC area. Now THAT could create some buying opportunities.

On the otherhand, it's still a long way off till the elections, and even if that turnover depressed the DC area market at that point, you're still looking to stay in the area for the long haul.

I'd buy.

Good luck,
Rita
0 votes
Kaye Thomas, Agent, Manhattan Beach, CA
Sun Sep 16, 2007
Friends mean well but unless they are in the real estate business they only know what the media tells them... they don't know much about an individual market. If you live in an area that has a lot of foreclosures with more to come then prices may well drop more. However if you live in an area where there are few foreclosures and the market is very stable .. you won't see any big price reductions and may even see prices rise a bit for the prime locations.

As Monica pointed out the FED is lowering rates to meet a specific situation and rates could well rise after the first of the year. A 1% increase in rates equates with a 10% change in price... that means if you live in a stable area where prices don't fluctuate much if rates rise 1% that's like a 10% increase in the price.

If you are planning on being in the property for 8-10 years I would consider buying now. I think that this fall/winter will be a good time to buy.. rates will be low and many sellers will be receptive to negotiating price to close before the end of the year. Over the long term I believe you will be better off owning then renting.
0 votes
Mr.P, , Arizona
Sun Sep 16, 2007
Wow Monica & Paul have given you some great advise.
Fine use of the word regurgitating.
Considering that you will be pay out a minimum of $2500 a month rent. Factor in tax savings, and you are planning to stay there 8 to 10 years. Yes you should be looking to buy. What perfect timing you have it is a buyers market. History has shown us the best time to buy is when everyone is selling.
Find a great Realtor and a great Loan officer. Look for the best investment, and make sure the numbers work.
0 votes
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