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Do falling home prices signal time to buy
NEW YORK (2/2/11)--Home prices in many of America’s largest cities continue to fall. The recently released Standard & Poor’s/Case-Shiller home price index reports average home prices slipped 1.6% in 20 U.S. cities during November. Prices in eight cities sank to their lowest levels since 2006 and 2007 (nytimes.com Jan. 25). These circumstances could mean it’s an excellent time to buy a home. Here are three things to consider before taking the plunge:
* How do you want to spend your extra money? Once you buy a house, you have to maintain it. You may need money you previously spent on life’s little luxuries to repair a leaky roof, fix a broken window, or replace light fixtures. * Would you benefit from tax breaks? Owning a home means you can deduct mortgage interest and property taxes you pay throughout the year from your taxes, but you must itemize these on your tax return. You benefit from tax breaks afforded to homeowners only if itemized deductions will be greater than the standard deduction. * Can you afford a monthly house payment? The 26/38 rule can help you identify how much house you can afford. A monthly house payment should be less than 26% of your monthly gross income and includes your mortgage, property insurance, and property taxes. Your total monthly debt obligations—including house payment, car loans, and student loans, for example—shouldn’t exceed 38% of your monthly gross income. This standard has some wiggle room; talk to your credit union home loan specialist for guidance.
For more things to think about before you buy a house, read “Find the Path to Homeownership” in the Home & Family Finance Resource Center.


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