Should you buy a house now? Response to Jim Cramer on TODAY

Recently Jim Cramer of “Mad Money” and “The Street” came out on the TODAY show and said that “no one should buy a house now” given recent changes in the real estate market. In response, Charles McMillan, National Association of Realtors (NAR) President-elect, went head-to-head with Cramer on a subsequent TODAY show segment. Needless to say, given Cramer’s showmanship – that is what he’s best known for – made McMillan look weak in contrast. But that is not to say that McMillan did not have several good points, no matter how blandly they were communicated.

First, let’s start off by saying that homeownership is the primary goal for most consumers looking to purchase real estate. Jim Cramer seems to be under the impression that most people looking to buy real estate are doing so for investment purposes – looking to make a buck down the line. But there are still potential buyers out there looking to buy their first home or a home to better fit their needs. He cannot possibly think that first time homebuyers should not buy a home now?! Does he truly believe that one is better off renting than buying a home in a depreciating market? I think even the real estate novice can see the benefit in buying a home and building equity, even without appreciation.

Second, while it is true that the mortgage industry is in a state of transition, mortgages are still available for qualified buyers. Jim Cramer said that “nobody can come up with the down payments” now needed for a mortgage. Is he serious? Are we in such a bad economic state that nobody has money in the bank to buy a house? Buyers can still buy with 5% down and in some cases less. The key is to work with an experienced mortgage professional. We can all agree that gone are the days when banks will give money to anyone with a pulse willing to buy a house, but mortgages are available and the rates are relatively low. I think we can all remember mortgage rates in the double digits…..

Finally, the conditions in the real estate market are regional and, many times, price range specific. For example, here in Sudbury the higher end ($1 million +) has been doing very well, while the lower end (under $600,000) seems to be struggling.

In conclusion, the safest bet is to consider real estate a long term investment. If you’re considering buying real estate in order to make money in the short term, i.e., the next two or three years, I would agree with Jim Cramer, don’t buy now. There are no guarantees in real estate. We cannot predict what will happen next year or three years from now, but in general, over the long term – 10 or more years (I know this feels like an eternity in this age of instant gratification) – real estate is a great investment.