Owning a home provides a sense of stability like nothing else in the world.
This. I went through the numbers and found that I would only need a net income of 14k/year to maintain my standard of living after my mortgage is paid, which should take about 10 years. Just imagine what that would feel like. The economy could completely crash and I would be ok even if I had a shitty minimum wage job, but this is only true if I own my own home. Renting? No way. I would need more like $40,000/year to stay afloat if renting, and that's only if I cut back on things like food, gas, and entertainment.
With interest rates as low as they are, now is the time to buy.
This is half true. Why are things like housing and education so ridiculously expensive these days? It's because interest rates are low. Imagine the average home buyer (individual or couple doesn't matter) has $1000/mo to pay for a mortgage. Humans are stupid and base purchases on what they can afford rather than what they need, so the buyer will want whatever costs $1000/mo even if it's the size of a football field. A person's income doesn't suddenly move up or down when prime interest rates go up or down, so the only thing that can change is property value. Using some rough numbers and an online mortgage calculator shows that a 1% interest rate would allow someone paying $1000/mo to borrow about $320,000. If the interest rate was 5%, that person paying $1000/mo can only borrow about $190,000. When your parents talk about how their house only cost $40,000, it was that price because the interest rate was probably 10-15% at the time; it's not only because money was worth more at the time.
Interest rates effect everything. Low interest rates drive up the cost of all equity. That includes real estate as well at stock prices.
It's hard to time the real estate market when talking about buying a home rather than buying an investment. Timing investments is piss easy. Wait for the crash, then wait for the interest rate to bottom out as a way of stimulating the economy through inflation, then you lock in that low intestest rate as long as possible. It's also best to shop in summer but buy in winter. Summer gives a sense of what the neighborhood is like (people are walking around outside), but prices are lowest in fall and winter. In theory, buying at that time would have both a low price
and a low interest rate. Timing a
home purchase is more difficult because that money "burns a hole in your pocket" as you sit on it. You're paying rent and losing money that entire time. You might save $20,000 on the purchase price of a house or condo, but that doesn't help if you lost $30,000 to rent during that waiting period. I was paying nearly $14,000/year in rent before I bought a condo. I thought real estate prices were still going down, but I didn't think they would go down 14k, so I bought a condo before the prices hit the bottom.
Buying at any time other than the bottom is more complicated. Having high interest rates during a period of high inflation would drive housing prices down, so the best thing to do during that period would be a mortgage with a floating interest rate because the interest rate would likely drop in the future, leaving you with low interest and a low purchase price.
I would say you should buy a home with a fixed rate instead of investing at this time. Alarm bells should go off when you hear about the DOW or NASDAQ hitting record highs. Hitting a record high means a crash could be around the corner. Things go up then down, not up then up again. Every boom is followed by a crash, and crashes usually happen every 5-10 years. The last crashes were in 2001 and 2008, so we should be due for a crash in the near future. Another thing to look at is the bond index. The bond market is much much larger than the stock market, so it makes sense that the bond market is the dog and the stock market is the tail. What are bonds doing right now?
not good. If you expand the graph to 10 years and apply the MACD technical, you'll see that the bond market is currently in steep decline. If you google "bond market crash" you'll find hundreds of articles where people are expecting a crash. The bond market is almost entirely held up by the fed printing money and using that money to buy US treasuries. Bernanke merely
hinting that the fed might slow (not stop) QE caused a steep drop in the bond market. The fed will need to taper QE eventually, which will crash the bond market which then crashes the stock market.