Today’s economy has a lot of people worried about buying a home. So much so that many would-be home buyers continue to sit it out. However, there are home buyers who are jumping into the market because they feel there is value in home ownership regardless of the economy.
So, is it a good time to buy a home? The answer, of course, depends on your circumstances. However, the basic indicators reveal we are at a time when the combination of historically low mortgage rates and low home prices provide an opportunity not only for real estate investors but for home buyers as well.
First, I’m sure you’ve heard that mortgage rates are at historic lows. Yes it is true that many economists forecasted that mortgage rates would increase through 2010 due to an anticipated global economic recovery. However, many now have conceded that the recovery has stalled; the rudimentary explanation is that economic concerns abroad have affected a domestic recovery. Additional economic pressures and volatile markets continue to suppress mortgage rates, such that it has sparked a new refinancing boom.
Second, home prices remain low. Even though the recent S&P/Case-Shiller Home Price Indices (standardandpoors.com) reveal home price increases in fifteen of the twenty composite cities (including the Washing DC metropolitan area) for what may seem to be the first quarter of gains this year, economists remain cautious in saying there is a housing recovery. As median home prices continue to remain relatively low, the National Association of Realtors Home Affordability Index (Realtor.org) indicates that homes continue to be as affordable as they have been in recent years.
Third, the Trulia Rent vs. Buy Index (truliablog.com) indicates that the Baltimore – Washington area rates relatively low in the index (meaning the costs of owning a home is less than renting). The Rent vs. Buy argument has always been hotly debated, even at the height of the seller’s market. There are those who will always say home ownership is more costly than renting (I suppose a broken watch is right twice a day); and let’s face it, home ownership is not for everyone. If you’re questioning the rent vs. buy issue, you can compare rent vs. buy via a “rent calculator” (available on various places on the internet) comparing the costs of home ownership as compared to renting.
Regardless where the housing indicators point, many home buyers are aware of and believe in the intangible advantages of owning a home.
Additionally, some financial talking heads are now talking about these housing indices and touting real estate as an alternative to volatile markets. Even the venerable Stuart Varney has recently been heard saying that buying a home is smart. (Of course I have to provide a disclaimer that I am not offering financial advice and you should consult the usual suspects of professionals and financial experts before you invest in real estate).
The American Dream of home ownership is not dead; it has just been on hiatus. Working hard to save money for a down payment to purchase your own home is on a comeback. And unlike some who might have you believe that buying a home is a “false economy,” those who know genuine value will always look to own their own home regardless of the economy.
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of August 16, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.