Can you afford NOT to buy?

I was enjoying a sushi dinner last night with a couple of my girl friends when the topic of home buying came up. One of the ladies had mentioned that she was thinking about purchasing a new home but was leaning more on the side of renting for another year to “save up some money”. “Why?” I asked. She said she simply didn’t think she had the money to buy right now.

This leads me to my point… Why are so many people on the fence? I think it is because we are not educating them into not only why NOW is the time to buy, but also showing them the cost difference if they waited a year.

Let’s look at an example: (and forgive me if I did not calculate this exactly right since I am not a mortgage person)

A house worth $200,000 today in Colorado Springs would be worth about 210,000 in a year based on historical data supporting a 5% appreciation rate in Colorado Springs, CO.

Now let’s look at interest rates. The last interest rate I saw was at 5.25 for a conv loan. Let’s say that goes to 6% in a year (which is actually being pretty conservative).

Now we look at the tax credit of $8,000 which goes away after Nov 30, 2009.

Now let’s compare:




Now I understand that the tax credit is for first time buyers only but even so non first time buyers would be saving $57,600 over the course of the loan.

If you continue to wait, you may never be able to afford a home of your own. Even if the housing market is in a downturn other things have to be evaluated including: rents, along with the cost of living which continues to climb.

There is no better way to build wealth and invest in your future then owning a home. Once you become a home owner, you are able to take advantage of the generous tax deductions that homeownership offers, not to mention you will be building 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.

If you are unsure about whether or not you can afford your dream home, you may want to scale back on your expectations and go for a home you can afford with the idea of moving up into a better home in the future. Instead of trying to buy a 2,000 square foot home, consider shopping for a 1,500 square foot home. Buy what you need and then you can build the equity and savings that it takes to get to the “dream home”

The sooner you make the jump from renter to home owner, the faster you will begin to create wealth for your future.

The question is not why wait the question is can you afford to?

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