This is not an interest rate problem is a good paying job problem, and too much debt.
What the feds are doing is trying to revive the housing bubble. It won’t work. Stupid people are
already priced out of the housing market and losing their homes to foreclosure or by choice.

And NO it is NOT a good time to buy a home. I want to see the Realtors buying these great deals themselves.

“This is a great time to buy or refinance, especially over the holidays. There are lots of buying opportunities out there!”

And THIS is what I believe is bad advice. This is NOT a great time to BUY a home. It might be a good time to refinance.

If you believe the history of homebuying has been the years 2003-2008, then yes, this is probably the best time in the last 5 years to be deciding to buy, just because the previous 5 were so horrible. However, the next 5 years are going to be SO MUCH BETTER you’d have to be a blind optimist to think otherwise.

I have owned two homes in the past. I just don’t see a reason to buy one at these prices. I’ve owned homes from 1975-1989, from 1994-2003, and my selling was due to job relocation. In both cases, the cost of owning a home vs. renting was worth owning a home. Today, it’s nowhere near that level.

My desire to own a home is determined when I can afford. David, if you honestly believe that the cost of owning a home will FOREVER be this much more expensive than renting, than yes, I will never own a home. But I believe you are mistaken. I believe that owning a home WILL get much less expensive over the next 5 years, and sometime before then, I will be owning my 3rd home. I can’t tell you exactly when that is in terms of MONTHS, but I can tell you it is when the cost of owning a home is less than 4X annual incomes for the area. And I have a strong belief that this will happen, because it has ALWAYS HAPPENED.

So, be honest with yourself, the market’s a mess and now is probably not the best time to buy. The median price is too far out of line with median income, we’re in a recession, and California’s unemployment rate is over 8% and has only been getting worse. I don’t believe there are enough buyers who will qualify at 5.5% or who will want to buy at current prices to turn this around.

Of course I’m taking into consideration the volatility of rates, which is my point exactly. If you can lock in at 5.5% or lower, that’s a stellar rate. Right now, my FHA rates for a borrower putting 3% down with a credit score as low as 620 on a $600,000 loan would qualify for a 5.5% based on today’s rates, and that’s with mortgage insurance that is half as much as a Fannie Mae conforming loan.

As far as a “dodging a bullet”, I’m referring to changes in lending guidelines, FHA requiring more of a downpayment, interest rates increasing, etc. If you got in with a low interest rate on a 30 year fixed, you’re in good shape, because you got a loan that you could afford.

Granted, if you’re paying $1200 in rent, and you like where you live, and you don’t think now is a good time to buy, I doubt you will ever feel it’s a good time to buy.

Let’s not forget that Pasadena and West LA are majority Jumbo mortgage territory. This 5.5% won’t even touch that.

To back up Tim, please crunch his numbers for us with your “tax benefit of owning a home” argument. $1816 + property tax + insurance + maintenance + HOA. Now subtract the “tax benefit”. I have a fantastic 2 bedroom apartment in a safe neighborhood at $1200/month. We’ll use Tim’s higher number of $1400. Does the tax benefit cancel all this out? For these calculations, we’ll ignore the rapidly depreciating home prices and the nominal loss of 2.5% savings interest on your 20% down payment.

I would agree that “chasing a bottom” is not the best strategy, but realtors take that a bit too far. There’s a difference between timing the exact bottom and following the trends and making a guestimate within a reasonable range of the bottom. Based on the current carnage, we are nowhere near there.

And just so you know, your statement: “What if you can’t qualify for financing for an unforeseen reason?”, assuming you didn’t buy… this sounds like a good thing. You probably dodged a bullet.

What if prices bottom out next year?

What if interest rates are 7.5%?

What if down payment requirements increase?

What if you can’t qualify for financing for an unforeseen reason?

There are a lot of “what if’s”. The point is there are so many variables, that “chasing a bottom” is usually not the most prudent strategy.

Last I checked, the only place you can buy for $400K is not in a particularly nice neighborhood and often requires “TLC” to bring it up to par, which will require an additional outlay of capital.

I currently rent a nice 2 bedroom apartment south of California Blvd for $1400/month, which includes my water bill. The only way I could possibly afford to live in this neighborhood would be paying over $600K for a condo. Even without a down payment, my monthly expenses would double. Why is this worth doing, when I can wait another few years and home prices will be lower?