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Question: Is this a good time to buy a house? I would need to use some of my BuyandHold account for a down payment.

Jed Schmidt

Answer:

Dear Jed,

While it’s impossible to time any market with 100% accuracy – being that the stock market, the gold market, the collectibles market or the real estate market – it does seem to be an optimal time right now to be purchasing rather than selling a house.

However, if you plan to sell some of your stocks to make a down payment, you might want to wait until the “financial bailout” situation has been resolved, and the market stabilizes. Meanwhile, I recommend you start doing the necessary paper and leg work so you’re ready make the right purchase at the right time.

Begin by getting pre-approved for a mortgage. Then, when you find the house, condo or co-op you like at the right price, you’ll be able to put in your bid and most likely beat out any competition.

Here are some facts from the National Association of Realtors that appear to support buying within the next few months:

The median price for homes across the country in August 2008 was $203,100 versus $224,400 in August 2007.

You didn’t mention where you live, but here’s the August 2008 versus August 2007 percentage price decline in various parts of the country:

South:        3.4%
Northeast: 3.8%
Midwest:   5.6%
West:       24.0%

Approximately 40% of the homes for sale in August were in foreclosure or sold for less than the value of their mortgages.

Yet sales nearly doubled in San Diego, Sacramento and Riverside (CA) and in Las Vegas (NV) and Fort Myers (FL).

Low prices attracted so many buyers that the number of unsold homes in the U.S. dropped by 7%, to 4.3 million. In other words, lower prices = more buyers = a smaller inventory.

The number of unsold homes at the end of August 2008 was down by 7% versus July 2008.

Bottom line: As the inventory of available houses shrinks, prices will stabilize and eventually go back up.

That translates into an appealing market for buyers with cash on hand and a good credit history.

Good luck!

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