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Is now a good time to purchase real estate?

Jan 16, 2012 by leo from Winchester, MA in  |  Flag
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If you're asking about buying a house, it's probably a pretty good time to do so, depending on where you live. The Case Shiller Index of residential homes shows that house prices have declined by some 30% in the past 5 or 6 years. And mortgage rates are at very low levels, making houses more affordable than at any time since the 1990s.

If you're asking about investment properties, then you must compare the net cash flow from the property you're considering to what's available in other types of risk investments.

Real estate has high maintenance costs which typically includes property taxes, repairs and other assessments. These must be deducted from rent payments in determining net cash flow. You must consider who will manage the property? There's a cost involved even if the answer is, you.

And remember, real estate is illiquid and can't easily be converted to cash if you need money.

We believe the current (very low) interest rate environment has created many distortions. One of the distortions is that investors have bid up investment real estate prices to the point where they are expensive by historical measures.

3 Comments   |  Flag   |  Jan 18, 2012 from Bryn Mawr, PA

What's your opinion about Southern California, and San Diego specifically?

Flag |  Jan 18, 2012 near San Diego, CA
Martin "Marty" Leclerc

Given I've only been to San Diego as a tourist, I don't have any insights to offer. Sorry.

Flag |  Jan 19, 2012 near Bryn Mawr, PA

There have not been many times in the past where interest rates have been so
low, and real estate prices have been low as well. Its a unique opportunity. If you are buying a home to live in, I think it is a no brainer. I dont think "timing" the market is a good idea. In 30 years, even with ZERO appreciation, you have a paid off home. In 30 years of renting, you have 30 years of receipts.

Flag |  Mar 25, 2012 near San Marcos, CA

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Yes. If you can afford it and especially if you are looking to make a home out of your purchase, not necessarily an investment to make loads of money. The tax benefits of owning a home and pride of ownership are great as well. I would not buy if you are looking to make a quick dollar.

Comment   |  Flag   |  Jan 16, 2012 from Boston, MA

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