It’s not news that that the real estate market is a buyer’s dream. Prices are down, foreclosure properties abound and interest rates on home mortgages are low. But let’s say that you’re a skeptic; that you have watched home and condo prices tumble downward over the last three years and you are wary of being among the millions of homeowners who have lost thousands on their properties. What indicators can you consult to see if now is a good time to buy? There are no absolute certainties in the real estate market nor is there way to ensure that home prices are not going to tumble after your purchase. However, here are a few factors to consider if now is the time to buy.

(1) Look at the trend in home prices

Nobody wants the price of their home to plummet right after they buy. To greatly decrease the likelihood of this happening, look at the long-term behavior of the home prices in your neighborhood of interest. 10 year and 5 year histories provide a bit too much information, so instead just focus on the graph that provides information about prices over a 1-year period. Peaks and valleys indicate that there is a great deal of volatility in the prices and should be taken as a sign that you are entering a risky market. Smooth lines, on the other hand, indicate stability and that the trend you see—both upward and downward—are likely to continue on into the future. That being said, if the 1-year graph of house prices in your market of interest does not have radical peaks and valleys and it is showing the beginnings a smooth upward trend after a period of decline, now might be the time to buy.

(2) Look at the trend in interest rates

Ensuring that you are getting the best possible price on your house and that its value is not going to drop right after you purchase should not be your only concern. Equally important is the interest rate on your mortgage; that is, the amount that you’ll be paying to the bank and not toward the principal value of your house. If there has been a long decline in the interest rate, you might want to wait it out to see if it drops further. However, if it has been steadily rising now might be the time to talk to a lender and lock yourself into a rate before it soars too high.

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This is filed under Home Buying.

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