Should You Buy A Home Now In The Midst Of The Real Estate
By Lender56, Fri Dec 9th

I have been watching this "housing bubble" for the past fouryears. Twice I thought about buying a home and both times Ibacked out based on the fear of being caught upside down on mymortgage if this real estate bubble should burst.

The skeptic in me kept saying "surely the housing market willcollapse; I would be foolish to buy now". I speculated that if Iwaited long enough I would be able to buy a house cheaper thanat current levels. My speculation so far has turned out to befalse. On the other hand, in 2006 many of the interest-onlymortgages out there will have to start paying principal. Also,adjustable rate mortgages, while popular right now, will seetheir rates increased in the next two years.

The doom-sayers keep predicting a bursting of the housingbubble. Even Alan Greenspan has cautioned The Public about theover-heated housing market.

So where does this leave us consumers who may be looking to buya house in this current market?

Well I have to revert to the clichéd three L's of Real Estate:Location, Location, Location!

I wrongly thought that the market here where I live in SouthernCalifornia would crash as the housing prices have becomeabsurdly high. That was four years ago. In speaking to realtorsand mortgage financers, I learned some interesting facts aboutmy particular area.

Now, of course, mortgage financers, realtors, and lenders wantyou to buy a house and finance the purchase of that home throughtheir agency or bank. So my initial reaction to their reasoningas to why the housing bubble (at least where I live) will notever burst was skepticism.

But this is what they said: A major university close to where Ilive is planning a major expansion. Over the next decade theyseek to increase their student population by 10,000 and theirfaculty by 2,000. Thus, there is going to be demand for housingfor at least the next ten years in this area.

Secondly, they explained that a lot of foreign money was pouringinto the Southern California housing market. These foreigninterests keep buying real estate and have showed no sign ofslowing, no matter what the price.

These two factors alone are enough to help keep housing pricesin my area fairly stable. I still think that we may see a 10%decline in real estate

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value over the next 5 years, but that isa far cry from the bubble bursting.

My greatest fear was to buy a $900,000 home and end up with itbeing worth $600,000 a year later.

This brings up another point. I feel flipping real estate inthis current market is becoming ever the more risky. It is hardto imagine home values rising fast enough in a short period oftime in order to flip the property for a decent profit. Threeyears ago yes; but not anymore, except perhaps in certain keyareas.

In short here is my opinion:

Yes, I do think it is still safe to buy a home in this currentmarket with the one caveat that you really need to study thearea in which you intend to buy a home. It is possible for thehousing market to crash nationwide while your home stillmaintains most of its value due to its location. Take a look atthe rate of new home building in your area versus plannedexpansions. Also look at your local economy. Is it stable? Arethere viable employment opportunities for people living in thearea? Is your local economy recession resistant due to thenature of its industry?

Lastly, regardless of the housing bubble and this current realestate market a house is still a great long-term investment. Soas long as you are not planning to flip the house or hold it fora few years before you sell you should be ok. Housing valueshistorically double every 10 years.

With that in mind, if you plan on buying a home for the longrun, I would not concern yourself with the current real estatemarket too much and focus more on getting the best mortgage rateyou can. I personally would not recommend interest-only loans oradjustable rate mortgages (ARMs), though for certain situationsthey do have great application.

Also, stick with the 30-year mortgage rather than the 40-yearmortgages being offered.

DISCLAIMER: The article is OPINION only and not meant to beprofessional advice. Please do not buy or sell a home based onthis article alone. Please contact a professional realtor ormortgage broker in your area for expert advice.

About the author:Lender56 operates the Lending TreeBlog, a resource site for home loans, real estate, mortgagenews, and mortgage brokers.

This article may be freely published as long as the link to Lending TreeBlog remains intact.