Some folks suggest that because home prices have risen they are no longer affordable. That is so NOT true. The percent of median income to purchase the median priced home is lower today at 21.4% vs 1995-1999 at 24.2% or 2000-2003 at 26.2%. Checkout today’s report and see the 47 out of 50 states where home affordability is better today that it was in the 90’s.
Some folks are also concerned that the 3.5% mortgage is not available and homes are unaffordable. Too low, too long has confused the situation. Checkout the link to today’s report – rates remain at historical lows (get them while you can). The charts in the report show only as high at 12.7% - I remember as high as 18% and I was right in the middle of buying an apartment building at the time. Markets adjust and people adjust. Still best not to wait when you can get a bargain today!
If all things are equal in terms of how much you have to put down and what you can afford monthly, then the higher your interest rate, the lower priced house you can afford. So, the kneejerk reaction is a plan to wait and “save more” and that can be a big mistake. While you are saving, prices are going up, rates may go up – and, oh by the way – you helped your landlord pay their mortgage by how many dollars?
We have an expanded page on Purchasing Power - check it out!
So why help the landlord? There are cost to not owning your home – very simply, money you will never see again. And, even worse – a new bill next month when the landlord expects payment again.
Consider that “owning” is a forced savings plan. It allows fixing your monthly cost and provides tax savings. You can live in your investment – you cannot live in a bank or in the stocks and bonds. The experts say that a homeowner’s net worth is 44x greater than a renter. Which do you prefer to be?
So, you are still thinking next year? Next year just happens to be next week. Hopefully, you are thinking 2018 and not 2019. In the last 12 months, home prices have risen around 7% (averages) – but whatever the number – use your choice. At 7%, a $100,000 home is about $107,000 (think about that each year). Therefore, if you wait – your cost goes up. If you wait, your interest rate may go up. If you plan to wait until you can save up enough – can you keep up with that? You can go the other way – buy now and if you can make extra payments on your mortgage, your mortgage will be paid sooner or you will achieve greater equity sooner, which you may use to purchase your next home!
On this one, I am just going to ask you to go directly to the link above and checkout the charts. In the very first paragraph today, we discussed home affordability. You will find the truth in these charts.
It is sometimes said that perception is reality. That does not apply here. Either you buy a home or you do not. You can make your dream of owning a home come true with some planning and some sacrifice. It may mean giving up a few things you would like to do and learning to live on a budgeted amount of money. It is temporary to achieve your goal. Have a look at today’s report for finer details.
Ever hear the phrase “Information is Power”? Getting preapproved gives you the power and confidence knowing that you can afford a mortgage and knowing how much you qualify for. It avoids shopping for homes that you cannot afford and the disappointment that would follow. Homeowners will know you are a serious buyer and they can negotiate in confidence with you.
Regulations, regulations, regulations. If there is not a regulation to cover something, someone will invent one. Government safety controls, bank safety (they want to be paid back) – but the bottom line, it is all your best interest. You are making a huge investment and better safe than sorry. The best is to work with qualified mortgage professionals and a REALTOR that can guide you through the process.
Earlier we said, “Knowledge is Power”. Well, here you can be an informed evangelist and spread the word on why housing is NOT headed for another crash. Sure, home prices are increasing – there was a lot of recovering to do from the great crash. And, now look at today’s report and the chart showing the increase in the four years prior to the crash and the most recent four years. Pre-crash were almost double the increase of today!
And, it is not just home prices that create a bubble. So much more affects the housing market. In the article today. The experts discuss fundamental value versus speculative value. Folks were buying and flipping like crazy before the crash – it was viewed as an easy way to make a fast buck. Today, flipping is down and so is speculative investing. The market is more stable.
Finally – we all have reasons to buy our home and, frankly, at some point in life renting MAY be a better option albeit temporary or longer term. But if you are just beginning life’s adventure and you want to increase your wealth, perhaps have more space and privacy and certainly more control over your environment, a home wins every time. Maybe that is the key to everything we write about here – there IS no place like HOME – your own!
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