Reading an article from 2008 on the housing crisis, I realized everything the experts had predicted had come true. Housing prices went into a freefall, the U.S. economy went into a recession and unemployment rates increased.
This had me thinking about another question- the idea that owning a home should be the American dream for everyone. Another blogger had the same thought. She asked the following question:
“Everything I read and watch on TV says I should be a home buyer by now, but I am having doubts. Certainly there should be reasons to not buy a home because not everybody does. How can I tell if I am one of those people who simply should not buy a home?”
Before answering her question, we should consider two of the powerful forces that made homeownership so popular in the past- lax lending standards and the conviction that housing is a fail-safe investment.
First let’s consider lending standards. Before most investors can consider owning a home now they will have to meet new safeguards which have been implemented by the lending companies. Homebuyers will have to save a substantial down payment and show proof of income. These new requirements will eliminate many potential homebuyers.
The second assumption many homeowners made was that their home was an appreciating asset. CNNMoney reports that “home prices have hit another new low in the first quarter of 2011, down 5.1% from a year ago to levels not reached since 2002 and prices are now down 32.7% from their peak set five years ago.” According to David Blitzer, reporting from Standard and Poor’s, “Home prices continue on their downward spiral with no relief in sight.” Some of the hardest hit areas include Los Angeles, Las Vegas, Phoenix, San Diego, San Francisco and Miami.
Given the increase in lending standards and depreciating home values, it makes sense for consumer to think twice before buying a home. Five reasons not to take the plunge include:
1. You do not have a down payment
With the higher lending standards, lacking a substantial down payment may completely take you out of the housing market. If you are determined to own a home you will need to save approximately 3.5% of the sale price for a FHA loan and 10% for a conventional loan. If you want to get the best interest rates for your home loan you will need to save approximately 20%.
2. You do not have a secure job
If your income is not sufficient to pay your current financial obligations, buying a home and paying the related home ownership expenses can be difficult. In many cases, especially if you may lose your job or if you may have to move in the near future, renting can be a smarter decision than buying a home.
3. Your family relationships are not stable
If you are in a relationship which is likely to end and you need your spouse’s income to make the house payment, you should wait to make any large purchases.
4. The real estate market is in a free fall
Nothing is worse than purchasing a home only to watch the value plummet. Is it ever a good idea to buy in a housing market that has fallen? Maybe, if you are able to buy a foreclosure or a home that is substantially less than other comparable homes in the area, but predicting the best time to buy is difficult for the average homeowner.
5. Everyone else has bought a home
This is probably the worst reason to purchase a home. Given the state of the economy and the current employment statistics, most home buyers are one crisis away from bankruptcy. If everyone is buying a home in your area, you may be competing with a lot of other people for a few homes, making it a seller’s market.
Hiring a Bankruptcy Lawyer
What was not addressed in this article, but is equally important, is saving a home you already own. If you have purchased a home and are facing a foreclosure, you may need protection.
Filing for bankruptcy may allow you to stop a home foreclosure and restructure your debt payments. Filing bankruptcy will also initiate an automatic stay which will stop wage garnishments, bank account levies, property repossessions, and harassing creditor actions.
If you own a home you would like to protect, contact a bankruptcy lawyer today to find out if bankruptcy is the answer for you. Keep in mind that filing for bankruptcy is a serious financial decision which should not be made without considering all of the consequences.
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