Why Buy Real Estate In Houston

FAQs (Buy Now Q & A)

Q: It seems that home prices appear to be moving down across the country. So why should I buy now? If I wait, won’t prices go even lower?


A: While that may be true in some of the markets that saw unsustainable price appreciation, like Phoenix, Las Vegas or most of Florida, Houston housing has maintained sustainable growth, and despite all of the recent bad news about price declines, housing in Houston actually rose slightly.

If you look at the market fundamentals, they show that now is a good time to buy in Houston – prices are affordable, interest rates are very affordable, and there are lots of homes to choose from and you can bargain with sellers.



Q: If I want to make the most of my investment in a new home, shouldn’t I wait until the prices drop?


A: If you try to wait and time the market until it hits rock bottom, you are likely to lose out. Just as no one can accurately predict the peaks and valleys of the stock market (name one person who sold their tech portfolio in April of 2000), the same holds true for housing. If you sit on the fence and wait for the absolute best deal, you could end up literally waiting for years. And most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation once you become a home owner. Remember, those who purchased homes in the early 1990s during the last big economic and housing downturn came out as big winners.



Q: All you hear about in the news are stories of how bad the real estate market is, if the existing homes market is soft, shouldn’t I wait to sell my house to maximize my profits? Doesn’t it make sense to wait out the market until I get a better price on my home before buying a move-up home?


A: It’s always better to trade up in a buyer’s market, like the one we are in now. While home values in Houston haven’t grown as inordinately fast as some did in the once hot markets like Phoenix, Las Vegas, Florida and others, it also hasn’t tumbled like the prices have in those very same markets that are driving all the bad news. This bad news has impacted the pricing strategies of new home builders in Houston, so they are offering a wide variety of incentives to keep their volume high. This makes it a good time to negotiate a better deal on a more expensive move-up home where you can realize a bigger overall savings now than you might realize from waiting for greater appreciation on your existing home.



Q: If I buy in today’s uncertain economic climate, my home may not appreciate in value. Isn’t it better to wait until the economic picture becomes clearer?


A: The fact is the economy is still solid, especially in Houston. After expanding rapidly over the past couple of years, economic growth is moderating – and this is actually good for housing. Most economists predict that overall U.S. GDP growth will average about 2.5 percent for the rest of the year. That means that job growth will continue to move forward at a pace that should not trigger higher inflation rates or higher interest rates. This period of moderate economic growth, job creation and low inflation, coupled with a true buyer’s market where there are plenty of homes to choose from, makes this an ideal time to purchase a new home.



Q: But wouldn’t it be better to “play it safe,” keep renting and wait to see if prices go down further?


A: The best way to “play it safe” is to actually buy a home. And here’s why. Studies show that owning a home is the best way to build household wealth. The sooner a person owns a home, the faster they begin to build up equity and wealth. When you buy a home, you are also purchasing price stability, knowing that you will pay the same monthly payment for the life of your 30-year mortgage.

Now consider the current rental market. During the past few years, many rental units have been converted to condos. As a result, there are fewer apartment rentals on the market. While home prices have been moderating, rents have been going up. Each year, your rent can easily go up a minimum of five percent to ten percent. Where is the economic security in knowing that it is possible your rent could surge 30 percent in three years? You don’t receive any tax benefits from paying rent, nor do you accumulate any price appreciation, as you would if you owned a home of your own.

All of the economic fundamentals show that this is a good time to buy a home and that there is upward pressure on rental apartments. The real risk isn’t in buying a home; it’s sitting on the fence.



Q: Interest rates have come down in recent weeks. I think they will continue to move even lower, so shouldn’t I wait until that happens before I decide to buy a home?


A: Interest rates currently stand at about 6.5 percent and are extremely favorable for buyers. In fact, they are hovering near 30-year lows. But waiting to time the market is a dangerous—and losing—game. Even those who follow the market for a living can’t figure out when interest rates will bottom out. If they could, they would all be multi-millionaires. Because interest rates are near historic lows, it is much more likely that they will head higher in the future as opposed to moving even lower.

And home prices don’t necessarily move in unison with interest rates. So, if you decided to roll the dice and wait to purchase a home and the price were to actually drop $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up a half-a-point during this period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.

In short, the smartest and safest time to buy is now. We know that interest rates are low today. We know that home prices are very affordable in Houston. We know that there are a good variety of homes on the market to choose from. We know that sellers are willing to bargain. And we know that builders are willing to offer attractive incentives to get your business. Any or all of these favorable variables could change for the worse six months from today.



Q: I have $10,000 to invest. Should I put that money in the stock market, or buy a first home?


A: Thanks to the concept of “leveraging,” purchasing a home is by far the best long-term investment. Leveraging means putting down a small amount of money to earn a big return.

For example, say you use that $10,000 to purchase a $150,000 home, and the house appreciates five percent during the first year. That means after one year, the house would be worth $157,500 – a gain of $7,500. Your annual return on your $10,000 investment would be a whopping 75 percent.

By contrast, putting the same $10,000 in the stock market and posting a similar five percent gain would only net a $500 return on investment.

And as a home owner, your savings continue to grow in two ways. Every year, a greater portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Second, your home appreciates over time, making it one of the very best financial investments. Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and strengthen communities. It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.



Q: I’m a first-time buyer and still can’t afford the type of home that I want. Is it best to wait and hope that prices eventually move lower?


A: If you continue to wait, you may never be able to afford to get into the housing market. Even as home prices are currently moderating – or even falling in some areas – rents continue to climb. The best way to build household wealth is to own a home. Once you become a homeowner, you are able to take advantage of the generous tax deductions that homeownership offers, and you begin to build equity in your property. As your property builds in equity, you can use those gains to sell your starter home and afford to move into a bigger house.

With so many homes on the market to choose from, your best strategy may be to scale back expectations for your dream starter-home. Instead of trying to buy a 2,000 square-foot home, consider shopping for a 1,500 square-foot home. Remember, the sooner you make the jump from renter to home owner, the quicker you begin to create and build up wealth for your family. After a few years, you will be able to leverage this investment and buy a larger house.




Source: NAHB

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