TO BUY OR NOT TO BUY….that is the question!

And, of course, the answer is as varied as the number of people asking the question.  It is always to be considered on a “case-by-case” basis.  As smart and considerate investors we want to attempt to “buy low, sell high” and that’s always a positive goal….not always completely possible but a goal, none the less.  I often use a tennis ball analogy to demonstrate timing the market:  it’s coming down, down and “boink”, it hits bottom and it’s on its way back up.  You know it was the bottom of any market only after it is recovering.  However, especially with real estate there are other components to the purchase:

1)      Tax benefits

2)      Emotional:  A house as “home and hearth”

3)      Long-term investment built on the premise that “everyone needs to live someplace”….a “buy and hold” philosophy

4)      Investing in yourself vs. paying someone else’s mortgage

5)      Establishing a fixed mortgage rate vs. anticipated and predictable rent increases

Interested home-buyers and investors ask, “are we at the bottom of the market?”.  I have attended two presentations by economists in the last two weeks in hopes of answering exactly that question.  Crystal balls are scarce these days but here’s what I’ve learned.  In the presentation by John Mitchell (principal of M & H Economic Consultants of Portland, past chairman of the Oregon Council of Economic Advisors and former chief economist of U.S. Bancorp), said (on a positive note) that “we have endured 32 recessions in our economic history and all have ended” and that he believe that our local market was “at or near the bottom” and he mused that he considered us “bouncing along the bottom”.   You can see more on my notes from that presentation at

www.portlandrealestateupdate.com .  A second presentation by Ted C. Jones, chief economist for Stewart Title Guaranty Co, delved into interest rates and their ultimate impact on perceived value.  He believes that due to the fact that interest rates are linked to the dollar and the impact of impending inflation, we will see interest rates rise by the end of the year (perhaps to 6.5% or 7%….still historically low, but not nearly the 4.5% to 5% we are seeing today). 

So, let’s run the numbers (you can go to www.bankrate.com or use the mortgage calculator at the bottom right hand side of this page and access an easy to use calculator if you want to play with these numbers).  Remember to use loan amount (the amount after your down payment).

Loan amount:  $250,000                                Loan Amount:  $250,000

Amortized over:  30 years                              Amortized over:  30 years           

Interest Rate:  4.5%                                         Interest rate:  6.5%

Principal & Interest payment:  $1266.71     Principal & Interest payment:  $1580.71

Loan Amount:  $300,000                                Loan Amount:  $300,000

Amortized over:  30 years                               Amortized over:  30 years

Interest rate:  4.5%                                           Interest Rate:  6.5%

Principal & Interest payment:  $1520.06     Principal & Interest payment:  $1896.20

Loan Amount:  $500,000                                Loan Amount:  $500,000

Amortized over:  30 years                               Amortized over:  30 years

Interest Rate:  4.5%                                          Interest Rate:  6.5%

Principal & Interest payment:  $2533.43     Principal & Interest payment:  $3160.34

Well, anyway you get the drift.  So, let’s say you purchase a home at $300,000 and the market continues to decline another 5% or $15,000 before starting a steady, albeit slow, appreciation again.  You would be still be saving approximately $376/month with the lesser interest rate or $4,514/year and if you multiply that by 30 years would equal a savings of $135,410 over the life of the loan!  A nice little “chunk of change”!!  We are in a very perplexing cycle, however, we’ve been through other difficult financial cycles.  And, also remember the big picture when it comes to real estate:

National data on housing appreciation:

1970-1979 = 142% appreciation
1980-1989 = 52% appreciation
1990-1999 = 45% appreciation
2000-2008 = 42% appreciation

Source: The National Association of Realtors

One should never underestimate the profound resiliency of the human spirit, nor how swiftly things can change for the better – often overnight.

About the Author | Janeese Jackson

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My job is service...service to you and your real estate transactions! How can you benefit from my 20 years of experience and expertise? What can I offer to make the process more productive? * Current information on available housing...comparative and competitive market pricing and analysis * Daily involvement in the local real estate marketplace * Thorough, comprehensive knowledge reflecting years of helping others complete their real estate business * Extensive network of professional resources to make the process as smooth as possible My commitment is to you! Being available to you...returning your calls...answering your questions...addressing your concerns...respecting your money...matching your timeline...meeting your expectations...helping accomplish your real estate goals!!