To take advantage of near-record low mortgage interest rates and home prices undervalued by as near as three percent nationwide, now is a great time to buy a home.
You’ve already missed the bottom of the market, but that doesn’t mean there aren’t great buys out there. Your community may not have appreciated as quickly as some of the big metro areas have recently. Your boom may yet come.
To begin with, the economy is growing quickly. From information collected on or before August 22, 2014, the Federal Reserve’s “Beige Book” report found economic activity is up in all eight national districts, including consumer spending, freight loads for deliveries of goods, and more.
But there are even better reasons to buy a home right now. Here are just a few:
Availability of Jobs Has Increased
The Labor Department announced that the jobless rate is now below six percent. Consider how far the job market has come since January 2010 when unemployment was 9.7 percent.
Houses hedge against inflation
The Consumer Price for All Urban Consumers is up 1.7% from August 2013 to August 2014, not including volatile food and gas prices. The food index has risen 2.7 percent, while the energy index has increased 0.4 percent. This is the first month since 2010 that the index hasn’t risen.
You may ask why that might be good for homeowners, that is because even in a tepid inflationary environment when prices rise a major asset, such as a home, becomes more valuable when purchased at a fixed cause. Typically, in an inflationary environment, housing prices rise.
Housing price gains are slowing
The median existing-home price in August was $219,800, which is 4.8 percent higher than home prices in August 2013. This marks the 30th consecutive month of year-over-year price gains. In 2013, home prices had risen to double digits.
Mortgage interest rates are still low
According to Freddie Mac’s archives the lowest that mortgage interest rates have been in modern history, since 1971, was in November and December of 2012. It was set at 3.35 percent, with 0.7 points for a benchmark 30-year fixed-rate loan. The most recent Freddie Mac survey found national averages at 4.16 percent with .05 percent points in September 2014.
Household formation has been silenced since the Great Recession preventing as many as 2.5 million people from forming households who otherwise would have. Economists with Harvard’s Center for Joint Housing Studies predict that annual U.S. housing starts should average 1.4 to 1.5 million over the coming decade. Considering that the largest generation ever, 81 million Echo Boomers, are well into the renting and homebuying age. The numbers should be closer to the 2.3 percent annual growth of the 1970’s when 78 million Baby Boomers reached adulthood.
Buy VS rent ratios favor homeownership
Trulia, a real estate marketplace and research group announced that nationally, rents rose 6.5% year-over-year in September 2014. Apartment rents were up 6.9%, while single-family home rents gained 5.2%. At the same time, housing prices have leveled off.
A housing market never remains even. There are always surges and dips. Buyers could wait for better market conditions, but the present alignment of low mortgage interest rates, slowing home prices, rising rents, and pent-up demands add up to great reasons as to why you should buy a home right now.