ALEX CHADWICK, host:
This is DAY TO DAY from NPR News. I'm Alex Chadwick. With the housing market cooling down and reports of rising rents in some parts of the country, the decision of whether to buy or sell or rent has become ever more difficult. Here to talk more about navigating the changing housing market is Michelle Singletary, regular DAY TO DAY contributor on personal finance. Michelle, how do you know if buying a home in current market conditions is the right thing to do?
MICHELLE SINGLETARY: First of all, don't buy a home based on what everybody else is doing. I mean, there was a time when people were saying, well, everybody's buying a home, I need to buy a home. You need to do the math before you know whether or not you can afford a home. And when I say do the math, I mean not just the ratios that the banks run you through.
They look at your data equity ratio - how much of this house can you afford based on both your income and the debts that you have? But you need to look at the entire picture - all your expenses that don't go into that ratio. And at the bottom line, you shouldn't be spending more than 25 to 35 percent of your net take home pay on your housing. If you are getting above that, you're probably are not ready to buy a home yet.
CHADWICK: But, you know, the conventional wisdom is everyone should buy a home. It's the best investment there is in this country, and it sure paid off for an awful lot of people.
SINGLETARY: It did. And, you know, I am a big believer in home ownership. It is clearly the way to wealth in America - not stock ownership, not owning a small business, but ownership. That's where most of America's wealth is tied up. But you want to do it when it's the right time to do it. The last thing you want to do is get into a house that you can't handle, and then have to go foreclosure, because the foreclosure rates are up in this country.
CHADWICK: Well, okay. Here's the other end of that. Selling a home, because for every buyer there's got to be a seller. How do you determine the value of your home these days?
SINGLETARY: In a market where home values are going up and down and just crazy, you need a professional to be able to price it right. You price your house too high, it won't sell. Too low, you're going to be leaving money on the table. So I would highly recommend that you look into an experienced real estate agent.
CHADWICK: But, you know, I'll bet every single person who thinks of selling a house says just stick a sign up in the front yard and someone is going to come by, and I will save a whole bunch of money because I'm not going to be paying it to that real estate agent.
SINGLETARY: They do, and then some people realize it's a lot more to it than just sticking a sign into your yard. Sometimes, a real estate agent can come in and show you things that will make your home sell better. When I sold my home about two years ago to buy another home, you know, I thought it looked great. And we have all these bold crazy colors, and my real estate agent - who happened to be my cousin - he said, well, you know, you need to repaint your walls. You need to - you've got too much stuff on your wall.
Clear some stuff out. And I think because of that, we actually probably increased the value of the home by probably about 20 percent, just doing some of those things fixing some things up. Because you know me, I didn't want to spending any money to do anything. But because I had that information and that guidance, we sold our house - not just quicker, but for more than I think had we just done it on our own.
CHADWICK: Michelle Singletary, our regular guest on the topic of personal finance. Her latest book is Your Money And Your Man: How You And Prince Charming Can Spend Well And Live Rich. Michelle, thank you.
SINGLETARY: You're welcome.
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CHADWICK: And if you have money questions for Michelle, she'd be happy to consider them. Go to our Web site, npr.org. You can click on the Contact Us link there. You'll find it on the top of every page. And please be sure to include Michelle in the subject line.
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