When is the Time to Buy?
Typically, the purchase of a new home is one of the largest, most complicated -- and not unusually, most emotional -- financial transactions and investments of one's life. If you decide to buy, your new home should work for you now -- fulfilling your basic housing requirements at an affordable monthly cost. (With no mortgage-rate time bombs hidden in the future.)
Ideally, it goes beyond the basics and even beyond being a large investment: it is a home you love.
Historically, San Francisco real estate has proven to be an excellent investment over the longer term. This is due to the advantages of leverage (the ability to finance much of the purchase); the significant tax benefits of homeownership; economic, demographic and geographic conditions in the Bay Area; and long-term appreciation trends. Real estate is usually considered one of the best hedges against inflation.
And if one doesn't "refinance out" increasing home equity, home ownership typically acts as a "forced" savings account to build household wealth over time.
As you ponder the home-purchase decision, here are some questions to consider:
1. How long do you plan to own the home you wish to purchase? (Buying and selling in the short term always entails more risk.)
2. Are current market conditions and interest rates advantageous for buyers?
3. How does the cost of home ownership, with existing tax benefits, compare to renting?
4. How does home ownership compare in the calculation of building your financial assets over time?
For the two previous questions, here is a link to an online Rent vs. Buy calculator (courtesy of RPM Mortgage) that can help you assess the variables: price, down payment, interest rates, inflation rate, non-mortgage costs of ownership, tax deductions, mortgage pay down and equity increase. You should also speak to your accountant.
Rent vs. Buy Calculator
5. And last but not least, how important is it to you to own the home you live in, with all that implies: control, pride of ownership, the ability to make changes and improvements according to your own tastes and needs?
Any investment has both potential risks and rewards -- which only you can weigh according to your specific financial circumstances, your timeline for ownership and your projection of future economic trends.
Paragon works hard to provide reliable information and counsel, and our highest duty when representing clients is the protection of their interests to the very best of our abilities. But ultimately only you can decide what the right decision is regarding the purchase of a new home.
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