When is the time to buy? Amie Chilson

When Is the Time to Buy?

May 17, 2013 by Amie

Typically, the purchase of a new home is one of the largest financial transactions and investments of one’s life. Whatever home you purchase should work for you now—fulfilling your basic housing requirements at an affordable monthly cost.
Ideally, it goes beyond the basics and even beyond being an investment: it is a home you love.
Historically, San Francisco real estate has proven to be an excellent investment over the longer term. This is due to the advantages of leverage (the ability to finance much of the purchase); the significant tax benefits of home ownership; economic, demographic and geographic conditions in the city; and long-term appreciation trends. Among other things, real estate is usually considered one of the best hedges against inflation.
And if one doesn’t “refinance out” increasing home equity, home ownership (as you pay down the principal balance on your mortgage month by month) typically acts as a “forced” savings account to build household wealth. In addition, the $250,000/$500,000 tax exemption on home appreciation capital gains can supercharge the financial return when you do sell.
Here are some questions to consider:

• How long do you plan to own the home you wish to purchase? (Buying and selling in the short term always entails more risk.) Do market trends appear beneficial to buyers?

• Are current interest rates advantageous for buyers? Lower interest rates make an enormous difference in the ongoing costs of homeownership (and your return on investment).

• How does the cost of home ownership, with existing tax benefits, compare to renting? How does it compare in the calculation of building your financial assets over time?

• How important is it to you to own the home you live in, with all that implies—security, control, pride of ownership, the ability to make changes and improvements according to your own tastes and needs?

Any investment has both potential risks and rewards—which only you can weigh according to your financial circumstances, your timeline, and your projection of future economic trends. You should also consult your accountant for a more detailed analysis of the above factors.
Please note that tax law is subject to change at any time.

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