Time Says: Buy a House Now!

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Time Magazine, Brought to you by LendingTree.com

Ignore the Headlines! says Time Magazine (Feb 25 '08), because there's "a potent case for buying now." Here is the case against waiting to buy, according to Dan Kadlec (with data provided from LendingTree.com):

First, you take the case of buying a $218,900 house right now, with a 20% down payment and a 5.5% 30 year fixed. Then, you assume in 12 months prices will drop another 10%, and the fed bumps up the interest rate, giving you a hypothetical $197,010 house, 20% down payment, 6% 30 year-fixed deal. Let's put it up as a chart:

Price	Down Payment	Rate	Payment
$218,900	$43,780	5.5%	$994.31
$197,010	$39,402	6%	$994.94

So, Dan Kadlec and his LendingTree.com data says that you "would have saved nothing and spent a year living someplace you'd rather not be." (emphasis his) Wow, sounds pretty convincing. But wait, this isn't quite the table as printed in Time, I added the down payment column to show some magically disappearing money. Dan assumes that the family has a 20% down payment each time, which means that somehow in the space of a year, four thousand dollars vaporizes. But we've a worse problem, Dan's math is wrong! Here's the table done correctly:

Price	Down Payment	Rate	Payment
$218,900	$43,780	5.5%	$994.31
$197,010	$39,402	6%	$944.94

Whoops, Dan's point isn't looking so strong now. Now the average family is saving 50 dollars a month, which is a significant savings. Let's add that missing $4k into the down payment, too, for the final comparison:

Price	Down Payment	Rate	Payment
$218,900	$43,780	5.5%	$994.31
$197,010	$43,780	6%	$918.69

Looks like a pretty good case for waiting, Dan. I'm not a journalist, but I'm pretty sure that if my whole thesis rests on a bit of simple math, I'm not going to jump to an online calculator and not check the results.

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