This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Is Now a Good Time to Buy Real Estate?

SEATTLE (Zillow) -- People always ask, "Is it a good time to buy real estate?" The answer is always, "Yes, but it depends." To make that determination, we first must understand the three most important words in real estate:

Long-term ownership
We buy property, whether a personal residence or for investment, in hopes we are financially better off down the road than we are today. The chance of that occurring is very low if one does not own real estate for at least five or more years. The reason is that transaction costs, repairs, monthly ownership costs higher than comparable rent and ownership hassles dictate that it is better to invest your money elsewhere and stay as a renter if you are not sure you will own long term.

If you're buying a home with the intention of staying for five or more years, then, yes, it may be a good time to buy.

Therefore, since you are going to be a long-term holder -- the longer the better -- you really should not be that concerned with short-term current market price fluctuations. Ten years from now, the home's value will be more than it is today.

What you should be concerned about is finding a house you "love," one that fits all the right reasons you want to own that particular property for a long time.

That could almost be the end of this article ... but there are a few more issues to consider to make sure it is a good time for you to buy. If you fail any of the below tests, you should think through the issues and whether it really is a good time for you.

  • 1. You are planning to be a long-term holder, at least five-plus years.
  • 2. For owner occupants: Payments are affordable and you have a steady job.
  • 3. It isn't significantly more expensive to own over renting. (This one is very important.)
  • 4. For investors: It makes cash flow sense, 4% to 5% or more cash on cash. The higher the better, but watch out for returns that appear too good to be true.
  • 5. It is the right property for you for all the right reasons -- you "love" it!
  • 6. It is fairly priced relative to the recent comparable market sales in the immediate area for similar properties.
  • 7. You plan to own it for a long long long time!
  • 8. Vacancy isn't too high in the area. This is very important, whether you'll be an owner-occupant or investor. Empty unstable neighborhoods or communities have a higher risk of vandalism and risk downward price spirals.
  • 9. It is in decent shape and doesn't need much fixing up. Skip the junkers, the ones with foundation issues or anything labeled as "needs a little TLC" in the listing, as that means it is a wreck. Leave the fixer-uppers for the contractors. And doing it yourself doesn't usually save you much money.
  • 10. It is not near a big vacant parcel, nonresidential-zoned parcel, empty or retail/industrial/religious site where you are not 100% sure what is going to be built or in use there. A new use of that land could affect the "quiet enjoyment" of your residential unit.
  • 11. You complete the proper due diligence to reduce your risk as much as possible. Mind your contract terms and contingencies, pencil out your deal, get a couple of bids on financing and dissect your GFE, review the HOA condition, review the property condition, make sure you have the right type and amount of property insurance in place, make sure you adequately review the title abstract and title policy and everything else you need to do to lower your risk.
  • 12. And you plan to own it a long long time!

Those three important words?
I laughed for reasons other than the obvious when someone once said "location, location, location" were the three most important words in real estate. We pay a handsome premium for "location"; is that premium worth it? It may or may not be, but "long-term ownership" are far and away the three most important words in real estate.

To summarize
Subject to the above issues, it is always a great time to buy real estate but:

  • Not for everyone.
  • Not at any price.
  • Not just any property.

Find a house you love or rental property that makes sense, that you will own for a long time, is in decent shape, lock in a long-term mortgage and sleep well.

Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of several books including "Real Estate Investment -- Rental Properties, Foreclosures, Short Sales" and "Buying a House, Condo or Townhome -- Guide to Smart Purchasing" and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.

>To submit a news tip, email: tips@thestreet.com.

Follow TheStreet.com on Twitter and become a fan on Facebook.

Zillow is a home and real estate marketplace dedicated to helping homeowners, buyers, sellers, renters, real estate agents, mortgage professionals, landlords and property managers find and share vital information about homes, real estate and mortgages. We are transforming the way consumers make home-related decisions and connect with real estate professionals.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs