Staying Put

Jonathan Clements

TEN YEARS AGO, the real estate market peaked. Today, prices remain 2.1% below their mid-2006 high—though they’re also 34.8% above their 2012 low, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.

As property prices have recovered, homes have become less affordable. The impact, however, has been softened somewhat by modestly rising incomes and slightly lower mortgage rates, according to data from the National Association of Realtors. The upshot: If you have the U.S. median family income of $68,897 and you bought the typical single-family home, which costs $249,800, the resulting monthly mortgage payment shouldn’t be any great financial strain.

But before you rush to buy that first home, consider three other factors. First, give some thought to how secure your job is. If there’s a significant risk you could be laid off, taking on the extra cost of homeownership probably isn’t smart.

Second, consider whether you might be forced to move in the near future for career, family or other reasons. Given the hefty cost of buying and selling real estate, you want to own your new home for at least five years, and preferably seven years or longer.

That brings us to a third and final consideration: Can you afford a place that you’ll be content with for the long haul? Ideally, you’ll buy a place that you will happily occupy for decades. If that’s not the case today—but could be if you spent a few more years saving for a bigger down payment and perhaps collecting a few pay raises—it might make sense to rent for a little longer.

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