The decision to purchase a home is a long-term decision that is usually not impacted by immediate events, and there are several reasons, including near-record low mortgage interest rates and improved housing inventories, for why this may be one of the best times to purchase a home.
The current market is especially attractive for first-time buyers, who are the most interest-rate sensitive segment of the market. With the recent and modest easing of home sale rates, pressure is being relieved from a hot housing market in many areas of the country. The result is a better balance between buyers and seller?s, which means buyer?s are less likely to find themselves, in a competitive bidding situation.
It is cheaper to finance the purchase a home today than at almost any other time in recent history. Lower mortgage rates mean lower monthly payments for consumers, giving buyers additional purchasing power.
This opens up new housing opportunities for many Americans, as housing is more affordable today than it has been in years. According to the National Association of REALTORS (NAR) housing affordability index, homes have been more affordable in recent months than at any time since 1973 - directly the result of today?s low mortgage interest rates.
However, these low interest rates may not be around for long. Traditionally, a rebounding economy leads to higher interest rates as a response to inflation that often frequents a strong economy. With a strengthening economy, investors will reallocate funds in their portfolios from bonds to stocks, and as funds move away from mortgage products, mortgage interest rates will rise.
Today?s housing market, with a generally improved inventory of homes for sale, provides opportunities for some prospective homebuyers who may have been frozen out of the hot market over the past few years. In many areas, there were frequently too many buyers and not enough sellers. The level of housing inventory hovered near historical lows (averaging around a 4.5-month supply through 2001). Consequently, multiple buyers would bid against one another, driving up prices and freezing out timid buyers. In many areas, there is now a better selection of homes, across all price ranges, for buyers to choose from.
Another factor is that one's home is a major source of wealth for most Americans and it provides an important source of funds to help them through emergencies and to make big-ticket purchases. In a recent NAR survey, three out of every four homeowners said that they have more wealth in the equity of their homes than they do in their investment portfolio. A study conducted by the Federal Reserve also shows that home equity comprises a larger share of household wealth than any other financial asset.
One reason why many American households have a large portion of their wealth in their homes is because home price appreciation has been steady with little volatility. In fact, home prices have never declined nationally on an annual basis in the 33 year history of the National Association of REALTORS tracking the data. Over the past few years, as the stock market has experienced tremendous volatility, house value growth has outperformed the performance of stock prices.
Home prices typically increase at the general rate of inflation, plus one-to-two percentage points, although growth is generally somewhat less during periods of recession. Even so, the national average annual increase, since record keeping began in 1968, is 6.3 percent. What this means for most buyers is that the accumulation of equity in their home generally will permit them to trade-up to a larger home in three to five years. Any peaks and valleys that may occur with values generally, smooth-out during the typical homeownership period, which is seven years.
In many cases, monthly mortgage payments can be less than rents for comparable property. Even in cases where the mortgage payment is higher, homeowners typically find that their payments will be lower than comparable property rents in only a few years. At the very least, even without considering the tax benefits, homeownership provides many more benefits than a drawer full of rent receipts.
Professional real estate services are especially important for first-time buyers, who often must take advantage of loan programs targeted to their needs in order to make the transition from renting to owning. In addition to finding the right home, real estate professionals are the best source for information on loan programs and services best suited to the needs of individual buyers, and they generally have information on ? and experience with - a wide array of competing loan products that can fit an individual buyer?s situation.
Home sellers may benefit even more from the services of a real estate professional. In today?s housing climate, real estate agents have the latest information on comparable housing values and the level of buyer interest in certain types of properties. Also, with the ability to qualify potential buyers, along with marketing skills and experience, the agent will be able to advise the seller on which offers to accept and negotiate the final agreement.
Whether it is a young single professional buying a first home, a married couple looking to move into a larger house, or a family looking for a vacation home, this may be one of the best times for Americans to purchase. The most effective way to take advantage of this opportunity to buy or sell a home is by using the experience and ?know how? of today?s professional real estate agent and broker.
- NUMBER1EXPERT™ 
