It depends. If you are buying with the expectation of the kind of rapid price increases we saw in the past I don’t see that happening.  If you are buying a home that you would be satisfied living in for at least the next five years I would say buy now. Prices are low and interest rates are low. If you get a fixed rate loan with payments that you can afford I don’t see how you can go wrong (with the exception of someone losing their job). If you own any stocks you know that you don’t typically trade in and out of the stock every time it moves (unless maybe you are a day trader). It is possible that if you buy a house now the price could go down somewhat. Considering where we are now if it does go down it probably won’t be a huge amount. If you have the mindset that you are buying the house to have a place to live and that you can afford the house payments so what if it goes down by some nominal amount?  If you go into the deal now with a five year time horizon it is unlikely that you will regret the decision at the end of the five year period.

Yes, with one possible exception. The one exception applies if you are unlucky enough to be in an area that has lots of short sale and bank owned properties for sale. In such areas you have a tough decision to make. The glut of homes for sale is probably driving prices down in the short term. If you have the flexibility of waiting for a few years you might want to consider that. If you must sell in the near term the quicker you do it the better off you will probably be because the glut of homes for sale in your particular area may continue to drive prices down. If you are in an area that does not have a huge inventory of homes for sale you might as well sell now. I say that because if interest rates go up the price you can get for your home will most likely go down. I also don’t believe that overall home price increases for the next several years will significantly outpace inflation or salary increases. Considering the time value of money the present value of what you can get by waiting a few years probably won’t be that much different than what you can get now. (Google “present value” to find out more about what that term means).

Most people get the largest home loan they can qualify for. The loan amount that someone can qualify for depends on their income, their other debts, the interest rate, and the overall criteria used for loan qualification.  As we all know home prices increased dramatically in the period from 2004 to 2008. They increased because anyone could borrow pretty much any amount they wanted with very few questions being asked. Let’s assume that the current basis for loan qualification stays constant. Then the maximum amount that someone can borrow will depend on the interest rate and their verifiable income. The interest rate on home loans currently remains quite low. It probably won’t go down very much below where it has recently been. At some point we know it is going to go up. With everything else constant when interest rate goes up the amount you can borrow goes down. Over the longer term when interest rate goes up that usually indicates that the inflation rate is also going up. To keep up with inflation most people see an increase in their income. Higher income means the amount you can borrow goes up. In the near term I believe that prices will remain relatively flat. They could even go down if interest rates increase. Prices could also go down if unsold inventory goes up too quickly as banks release more foreclosed properties for sale. Over the long term I expect prices will go up slowly consistent with the increase in incomes but the home price increase will be nothing like what we’ve seen in the recent past.