Tuesday, February 07, 2006

Housing Discussion, Part II

The Young Professionals have been talking a lot about home buying lately. If you read our "Rent or Buy" arguem...I mean discussion, then you know that 1 of us owns a home and the other 2 rent. As a follow-up to the Young Professionals initial post, I have 2 additional articles to look at.

The first article from MSN Money discusses the 3 worst reasons to buy a home. The decision to buy a home or to rent can be a very tough, especially right now. Real estate prices are very high and everyone keeps talking about the bubble bursting. This is making rent look cheap in comparison. Buying is not something that should be rushed into, especially if these are some of your reasons:
  • It's better than the stock market
    Houses recently have been appreciating faster than the stock market, but think about how out of hand it has gotten. A raised-ranch around here is about $300,000, do you think that it is necessarily going to keep going up at that same pace? I personally don't see that happening. I also don't see the housing market totally crashing and houses becoming worthless, but they aren't going to double anytime soon.
  • I'm tired of throwing money away on rent
    The first thing to keep in mind is that you are not throwing money away...you are getting a place to live. As was mentioned in the previous article, rent is so much cheaper around here that it has allowed DD to invest a lot more money than he could have if he bought a house. Renting also gives you more freedom to move if a better opportunity arises in your job or social life.
  • I need the tax deduction
    The tax deduction is nice, but it isn't as if you are making money from the deal. You just aren't paying as much out as you would be with no tax deduction. This reason will be even worse if some new tax proposals go into effect, see "At risk: your home-mortgage deduction."
I agree with the article, if those are your reasons for wanting to buy a house...don't, or at least think about it a little harder.
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The second article from MSN Money discusses 7 home-buying traps to avoid. Many of these could be considered common knowledge, but buying a home is difficult. There is so much to consider and worry about that you may forget some of these hazards.
  • Blindly using your agents inspector
  • Taking advice about what you can afford
  • Getting a "temporary" loan
  • Opening or closing credit accounts
  • Failing to investigate the neighborhood
  • Buying when you are not ready
  • Not buying when you are ready
I personally hit at least one of these and I know people that have hit many of these. As I said, a lot of thought must go into buying a home, especially your first home. Take your time and don't rush into things too quickly. Try to seek out advice from someone that you know that already purchased a house, especially if it is in the same area. This can be very helpful.

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