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Window of Buying Opportunity May Be Closing - 2009-10-04
I heard this week from a young couple wanting help. Thinking about buying their first home, they wonder if they should just wait until next spring. They had actually come close to buying a new house in the fall of 2007, just before the collapse of Lehman Brothers, and now are glad they waited.

They had listed out the pros and cons of buying a house now, and couldn't come to a decision.

On the "wait and see" side, the following points were made:

* Home prices in metro Atlanta may keep declining. According to the Federal Housing Finance Agency, metro Atlanta home values have dropped between 10 and 15 percent over the past two years, but have increased slightly in the past couple of monthly reporting periods.

* Interest rates may stay low for some time, and inflation is not a major factor now.

* Possibility of more foreclosures in the coming months, and this may flood the market with bargain houses.

and finally

* It is harder to get qualified for a new loan today than it was several years ago, and applicants need solid credit scores, stable jobs and a larger down payment than in the past.

On the plus side, they had listed out the following reasons to take action now:

* Thirty year fixed rate loan at less than six percent, and that may change.

* They had saved up enough to make a twenty percent down payment, eliminating the need for private mortgage insurance.

* There is a large supply of homes available to choose from, and sellers who hope to sell are more flexible than in years past.

* The Federal Tax Credit of $8,000 for qualifying first-time homebuyers is set to expire at midnight on November 30, and as of this writing, no extension has been approved.

As I looked over their list, I agreed that they had done their homework.

All their points are legitimate, and all are reasonable. But I added that there is one factor they overlooked, and that is the issue of time.

One of the key points in any homebuying decision is answering the question: How long do you intend to own this house?  The answer affects several aspects in the decision making process.

For starters, the tax credit rules require that you own and occupy the house for at least three years, or you must repay the entire amount as additional income tax, so there's your minimum.

Beyond that, the longer you own your home the greater the likelihood that replacing it will cost you more, both in terms of price and interest rate.

Finally, the prospect of values declining for another three years defies historical norms. In fact, prices appear to have stabilized.

My advice was this: If you can find the home you want and get it closed by November 30th, you will likely be very glad you did.   
 
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