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Personal Finance > Ask the Expert
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Is now the time to buy a house?
graphic November 5, 2001: 12:03 p.m. ET

Should I buy now or should I wait until after the new year?
MONEY columnist Walter Updegrave
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    NEW YORK (CNNmoney) - I'm considering buying a home. Should I buy now since mortgage rates are low, or should I wait until after the new year?

    I've always thought that trying to time moves in or out of the housing market makes about as much sense as timing moves in and out of the stock market -- that is, no sense at all.

    Besides, mortgage rates are an incredible deal right now. You can find 30-year fixed-rate loans for about 6.5 percent or so, which is nearly two and a half percentage points below where they were just a year and a half ago. So I don't see much reason to try to get cute here by playing a financial guessing-game. (For the most recent figures on home mortgage rates, click here.)

    Granted, with the economy getting weaker, you would expect mortgage rates -- and perhaps even house prices -- to head south from here, which would mean that holding off your home purchase for a bit would make sense.

    On the other hand, if the economic news begins to improve a bit and people become convinced a recovery isn't too far off, then mortgage rates and house prices will likely start to rise. Which means you would have been better off moving now.

    Up or down, the economy is anyone's guess

    The fact is, at this point I don't think anyone really knows which direction the economy and interest rates will take over the next couple of months. There are just too many uncertainties. What's more, it's not as if you can grab a house and a mortgage as quickly as you can buy a stock online.

    Real estate transactions take time. By the time your realize rates are nearing a bottom and you start seriously shopping for a house, rates may have already begun rising again by the time you sign a deal and lock in a mortgage. So unless you're clairvoyant -- or better at predicting the path of interest rate than most professional bond investors -- I don't think it makes sense to postpone your decision in the hopes of getting a better deal in 2002.

    One thing I think you should consider before going ahead with your purchase, however, is job security. Layoffs have been mounting since Sept. 11 and the most recent employment report was bleak. So before taking on a big financial commitment like buying a home, you want to be sure that, in the event you are laid off, you would be able to handle your housing payments until you are able to find a new job. For most people that means having enough money set aside in a money-market or bank account equal to three to six months' worth of living expenses. If you're comfortable on that score, my suggestion is strike while the mortgage rates are hot, or low or, well, you know what I mean. graphic

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