Is 2013 the Right Time to Buy a Home?

By Benjamin Feldman

Have you noticed it yet? The growing murmur out there, getting louder every week, bubbling up in newspapers, on TV and on news sites -- and it's telling you to buy a house in 2013. OK, maybe that's a bit of an exaggeration, but there are definitely a lot of experts (and non-experts) suggesting that this year is the right time to buy a house. And that murmur may soon turn into a deafening roar. So let's look at the questions that you need to ask to determine whether 2013 is really the best time to buy a house.

Is buying a house right for you right now? We'll discuss the numbers in a second, but before we do that, it's important to get one thing straight: No matter what the national economic and housing market trends indicate, it only makes sense to buy a house if it meshes with your current place in life and your future goals. For example, if you have a stable career and a job that pays enough to cover your living expenses (with some leftover for emergencies/retirement), and you plan on being in the same place for 3 to 5 years or expect that you could rent the house out if you were to move away, then you are probably in a good position to consider buying a house in 2013.

On the other hand, if you can't imagine giving up your mobility, if you can't count on having a steady income, or if you have substantial credit card debt or student loan debt (or are struggling to pay your bills each month) then it might not make sense for you to buy a home at this time.

Are mortgage rates the best in 2013? So let's say you've decided that now is a good time for you personally to buy a house. The next question is whether it's the right time financially. A big part of the answer has to do with interest rates. Lower interest rates are always better, obviously, because they save you money. Even an interest rate that is 1 percent lower could save you $50,000 or more over the course of a 30-year mortgage. And if you can lock-in a low rate with a fixed-rate mortgage (rather than an adjustable-rate mortgage) that's even better. So the question is, are interest rates low right now? The experts say "yes." This graph shows average mortgage interest rates over the past 30 years:

As you can see, rates are currently at about 3.5 percent, which is lower than at any other point in the past three decades. So clearly, it's true that this is an opportunity to lock in low interest rates. But do we have any reason to expect them to increase in the near future? That's hard to say. Some experts have been predicting inflation and rising interest rates for the past few years and it hasn't happened yet. These kinds of predictions are notoriously difficult to get right. However, it's probably not a bad idea to assume that these rates will increase at some point in the future. That still doesn't leave us with a complete picture, though, because we haven't looked at housing prices yet.

Read the rest of this story on Credit.com.

See more on Credit.com:
The First Thing to Do Before Buying a Home
Why You Shouldn't Obsess Over Mortgage Rates
3 Things That Can Stop a Mortgage in Its Tracks

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