The Wall Street Journal

By Dan S. Barnabic, March 16, 2015

To understand how important it is to buy at the right time, just think of condominium units that, only a few years ago, sold at very high prices but lost their value — many of them as much as 50% or more — as a result of the real estate collapse of 2007.

10 golden rules of condo buying

How to know when to buy a condo

By Dan S. Barnabic

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In fact, the real-estate market is still in its stages of recovery. By January 2015, the average prices of real estate haven’t yet reached the level of their 2006 peaks.

So, the idea is to buy a condo unit at the right time. The problem is that no one can predict with any degree of certainty when the right time is. As I advised readers last week, never rush into buying a condo. First consider some common-sense indicators before you buy.

Don’t pay much attention to real-estate brokers’ forecasts — or, for that matter, to banks’ analysis of the markets — because these prophecies are mostly self-serving and profit driven. The real-estate brokers’ and bank executives’ very livelihood depends on boosting consumer confidence. They shouldn’t be taken as impartial sources regarding markets.

Instead, pay close attention to official government stats and findings regarding the stability of interest rates for the immediate future and beyond, the surplus of unsold real estate, and the state of the overall economy. Reports of these findings are published on government sites, reputable newspapers, broadcast on TV, and posted on the Internet.

In the end, regardless of market conditions, the right time to buy is:

  • When you can buy a condo unit at a price that requires no more than one-third of your annual income to cover mortgage payments, maintenance fees, and realty taxes.
  • When you’re able to obtain a mortgage at an affordably convenient interest rate, locked for many years to recession-proof yourself from exposure to market swings.
  • The adage “buy low, sell high” may be followed by exercising common sense, namely, buying when many unsold units are available, when interest rates are set to remain at convenient levels for some time to come, and when there are signs of improvement in the overall economy.
  • Rely exclusively on government sources regarding market conditions, interest and unemployment rates, and consumer confidence levels.
  • Always buy a condo unit at a price that requires no more than one-third of your annual income to cover mortgage payments, maintenance fees, and realty taxes. By achieving this condition, you will automatically create your own “buy at the right time” goal. If you aren’t in a position to achieve this condition, save and wait until you are.
  • To achieve ultimate peace of mind, go for long mortgages with a set interest rate so that your overall exposure remains constant.

This column is the second in a series of forthcoming articles on the “10 golden rules of condo buying”:

  • Don’t rush
  • Buy at the right time
  • Beware of bargain prices with high maintenance fees
  • Make a low offer
  • Make sure you can afford the carrying costs
  • Buy with a solid down payment
  • Be cautious when buying during preconstruction
  • Beware of complexes with many units rented out
  • Check the physical facts
  • Consider demographics and future resale value