This year has definitely been the one in which I have been asked this question the most. With the first-time homebuyer tax credit, low interest rates, leveled (or possibly decreased) listing prices and a large inventory, it can certainly feel like the “perfect storm”, in a sense.
While there is certainly no magic formula for determining the right time to buy, I am under the belief that the tax credit should not be the determining factor. While I think it is a great program for new homeowners, it is also not a reason for anyone to rush out and buy a home just to take advantage of the credit. If there is one thing we all should learn from our current mortgage crisis, it is that all loans should be well thought out, even if a person is approved for a loan. Many of the people who are going through short sales and/or foreclosures now are people who were approved for loans years ago, and found out the hard way that they were not able to pay the bills required to maintain their ownership.
Many first-time homebuyers are depending upon friends/acquaintances to rent rooms within the property to help make the payment on the loan. And while this is certainly a great way to gain equity and financial stability within a home, the worst case scenario should also be explored. What if rent is late or missing? What if a tenant moves out and a replacement cannot be found? How many months can a homeowner make the full mortgage payment alone before payments fall behind?
Another factor important for first-time homebuyers to consider is how much their actual monthly expenses will run. I would presume that in most first-time homebuyer situations, the individual has been renting previously, in some fashion. It is easy to assume that owning a home won’t be that much different. And, in some ways, that statement can be correct. However, in other ways, it can be vastly different. All of a sudden, when something within the home breaks, there is no landlord to call – you are the landlord. Is there a “slush fund”, of sorts, set up for unexpected repairs? Also, have all the monthly expenses been reviewed thoroughly? Home ownership will usually include expenses that could have been included in “rent” previously. Items that could easily be overlooked at first glance include taxes, home insurance, sewer fees, water fees, garbage fees, potentially larger heating bills, homeowners’ association fees and other similar hidden costs.
With all of the above said, it is a great time to buy real estate in Missoula, Montana. There is a lot of inventory on the market, and many Sellers are highly motivated to get their homes sold. In addition, our market has not shown the extreme downturns that some markets in our country have been through in the last few years; instead the Missoula market has seemed to level off some, but fare well overall. Interest rates are still great, and if individuals have not owned a home before, they will receive the benefit of the first-time homebuyer tax credit, as long as they have a home under contract prior to 4/30/10, and closed by 6/30/10.