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Spokane, Washington  Est. May 19, 1883
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Potential homebuyers stay out of the market for many reasons, but it comes with a cost

Home equity and auto loan rates are displayed at a bank in North Andover, Mass., in March 2017. The benefits of purchasing a home and building equity over time can’t be underestimated. (Elise Amendola / AP)
Home equity and auto loan rates are displayed at a bank in North Andover, Mass., in March 2017. The benefits of purchasing a home and building equity over time can’t be underestimated. (Elise Amendola / AP)

Asked to give some advice for the future, Rob Higgins urges wavering first-time homebuyers to look to the past.

Because if history teaches us anything, Higgins says, it’s that opportunity shouldn’t be spurned.

Higgins, executive officer of the Spokane Association Realtors, is partial to the story of “grandma and grandpa, sitting down eating their oatmeal and telling each other, ‘aren’t we glad we own this house.’”

“That’s Middle America,” Higgins said. “It’s that warm feeling that we own this house free and clear.”

The message is old-school, but never more true in an era of appreciating home values, steepening rents and relatively low interest rates.

Moreover, Higgins said, “When you’re renting, you’re paying someone else’s mortgage.”

The math is easy. Why pay $800 a month when that money could go toward building equity?

Higgins cites the 4.3% average annual appreciation in Spokane in the past three decades as a big reason to take the plunge.

Another is the possibility of an increase in rates, meaning that waiting might tack on another $100 per month in interest over the life of the mortgage.

“There are all kinds of positives, plus you own something,” Higgins said. “There’s pride in ownership and building wealth long-term by driving down the mortgage and building equity.”

Still, many prospective buyers hesitate – “paralysis by analysis,” some call it.

Or just plain pessimism: about the economy, interest rates and their own personal situation.

However, as Higgins points out, waiting even a year could not only bring higher interest rates but a bigger mortgage because home prices keep climbing.

However, there are legitimate reasons to wait. The biggest might be your job.

If you’re certain that you may soon be transferred, it might be better to rent a home than buying. Or you may plan to move because of school graduation or other life event, so you may be better off renting.

The rule of thumb is to buy a home if you plan on being in the area for at least five years. Owning a home also comes with difficulties. For example, if you lose your job, it can be tough to pay your mortgage or move for a new job.

Another reason to wait is driven by finances. Don’t buy a home if you’re carrying large debt – even if you’re approved for a mortgage. High debt can prevent you from paying your mortgage, which will severely damage your credit and financial health.

Even if you can qualify for a mortgage, it doesn’t necessarily mean you are really ready to buy.

It’s also a good idea to forecast what your debt-to-income ratio will be after you buy a home; almost certainly, it will be higher than while renting.That’s doubly true if your new home is a fixer-upper. Many buyers struggle to hold off making improvements, and the resulting debt could be crippling.

One more caveat: Don’t allow yourself to be pressured by family and friends who urge you to buy now. Only you can make that decision, based on your circumstances.

If those fears and concerns are addressed, you’re probably ready to buy. There are thousands of reasons to do so – tens of thousands if Spokane’s real estate market remains hot.

During the year ending in January 2019, prices rose an average of 14.5%, to $255,850.

Even if the market cools slightly this year and finishes up 10%, that would mean the median price would be about $282,000 by next January. Additionally, if interest rates remain steady, that means financing an additional $30,000 over the duration of the loan.

That’s called opportunity cost.

Instead, Higgins urges prospective homebuyers to seize the opportunity now.

“And 20 years later you can turn around, look at your house, and say ‘I did pretty well,’” Higgins said.

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