Wall Street Journal - Now is the Time to Buy

Part 1 

Paraphrased by Dr. Reddick

In the year 2006 the housing market was in climax. What happened soon after, many could have not imagined.  According to the Standard & Poor’s Case-Shiller Index the prices are now at the lowest. Some have fallen back to 1990s levels. 

There are many signs that suggest that now is the right time to buy. The ratio of home prices has dropped to 20.9% according to Moody’s analytics. Mortgage rates have fallen to a 50 year low. Homes are now more affordable then they have been in recent years. This situation however will not last long.

Moody’s Analytics predicts that the home prices will begin to rise in the year 2013. Home builders will not stay idle for long though, as there are a growing number of new households formed each year.

According to the Wall Street Journal the short term outlook on owning a home seems discouraging due to a weak job market and foreclosures. Right now many people are turning to renting instead of buying homes because of the current economy. The long term benefits of owning a home however out weigh the short term outlook. “And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with,” says the Wall Street Journal. 

What’s going on right now and the changes that are soon to come:

  • Household formation increased by almost 950,000 last year. When the economy was falling, many people were moving in with family members or friends.
  • In the next two years the demand for second homes will take up the extra inventory.
  • Baby boomers are waiting for the economy to recover. They will be soon demanding rental apartments and starter homes.
  • The housing market is affected by the economy. As we start to recover and see growth in the job market, prices of homes will also start to increase.
  • Rental properties are seeing high occupancies because people are simply scared to buy right now.
  • Interest Rates are currently lower than they’ve been in 50 years.

People are taking advantage of the current housing market by purchasing homes that are now half the value they were just a few years ago. Independent Housing economist Thomas Lawler states that “Whatever the excess supply of housing is, it is shrinking pretty fast.” As the economy recovers people will start purchasing homes, which will drive up the prices along with mortgage and interest rates. 

 Source: Wall Street Journal, “Why It’s Time to Buy” June 4, 2011

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