The Wisdom of Buying a Home Now

Housing is a basic need that has one of the biggest impacts on people’s wellbeing and quality of life.  An aspiration of most of us, home ownership engenders a sense of stability and security for you and your family as well as being an investment in your future.  And if you have been biding your time waiting for the perfect moment to make that investment, it may very well be now.

More than half of economists, real estate experts and investment strategists polled by MacroMarkets LLC in June said they now expect national home prices to hit a bottom sometime in 2011.  Multi-millionaire hedge fund manager John Paulson says that current record-low interest rates make this the best time to buy homes in 50 years. Paulson was one of only a handful of people who predicted the sub-prime collapse. His advice is: "If you don't own a home, buy one. If you own one home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home."

The tax benefits of home ownership are well known of course. Lower home prices coupled with historically low interest rates really do make this the ideal time to buy a home. Even if home prices go down some more, the overall difference would be negligible.

Let's say there is a house for sale for $250,000. If interest rates are say, 4.3%, your monthly principal and interest payment is $981. Over the course of this loan, you will pay $191,693 in interest. Now let's drop the home price to $225,000 -- a 10% price deduction. If interest rates are a point higher -- 5.23% -- your monthly principal and interest are now $991 ($10 a month more) but your total interest paid over the course of the loan is now $221,282 -- about $30,000 more over the course of your loan. A 1% increase in mortgage rates more than offsets a 10% drop in the home's price.

Quality of life plays a huge role in deciding whether to purchase a home or continue to rent. The benefits of home ownership versus renting are significant. Home owners are happier and healthier, they enjoy a greater feeling of control over their lives. Owning a home is one of the best ways to build long-term wealth. Historically, a home owner’s net worth has ranged from 31 to 46 times that of a renter. Home owners are free to redecorate, renovate, and modify their homes as they wish. They don't move as frequently as renters, providing more neighborhood stability. This stability in turn helps reduce crime and supports neighborhood upkeep. Children of home owners do better in school, stay in school longer, are more likely to participate in organized activities and spend less time in front of the television. And the list goes on.

Quality of life is also a consideration if you find yourself living in an area that doesn't suit your needs. According to a recent survey by Better Homes and Gardens Real Estate LLC in collaboration with leading media and marketing company Meredith Corporation, one in five U.S. homeowners have either moved from their home or would like to move because their neighborhood or community wasn’t ideal for their lifestyle.

There's never been a better time to start living the life you've always wanted. So what are you waiting for?

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