You’ve probably heard it all over media outlets. "Affordability is at an all-time high." "Interest rates are below 4.0 percent!" The question remains, however, why buy a home? What do these proclamations actually mean for you?
Let’s look at these claims. Affordability is at an all-time high. This is calculated by a ratio of median household income to median home prices for any given area.
According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) this record level is around 73 percent of all new and existing homes. To put this number into perspective, before recent years’ developments it was rare to see the HOI go above 60 percent.
"With interest rates at historically low levels and markets across the country beginning to improve, homeownership is within reach of more households than it has been for nearly two decades," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "However, tough economic conditions -- particularly in markets that experienced major changes in house prices and production — as well as extremely tight credit conditions confronting home buyers and builders continue to remain significant obstacles to many potential home sales."
Some areas are fairing better than others. Topping the list for affordability, as one example, is Lakeland-winter, Florida, where a median household income of $53,800 made 92.5 percent of all homes sold within reach of buyers.
What does this mean for you, the buyer? It means that you should ask your local real estate agent what home prices are like in your area and compare those to your own family income. What is the median household income for your region? It varies greatly by city, state, and region. Are you in the position to buy a larger home or move up thanks to low rates and low prices?
The market is the perfect climate today for buyers with cash for downpayments, steady incomes, and good credit scores. Buying today is full of opportunity. You can buy more home for less money and pay less interest over the life of the loan thanks to incredibly low interest rates.
Rates have never been this low. They are currently under 4.0 percent for buyers with good credit (think credit scores at least 720). Even if you don’t have an excellent credit score you may still be eligible for other good rates or deals. Now is the time to find out!
There are fewer buyers on the market, which means you have more leverage at the negotiating tables. Sellers are willing to make more concessions and many are motivated to sell, especially if their home has been lingering on the market.
Additionally, there are incredible deals to be had on the glut of foreclosed and short sale homes which are now on the market. Recent reports have indicated that this deluge of foreclosed home isn’t going away any time soon due to delays from banks. Many homes that have been delinquent for years are just now hitting the market. These banks are ready to unload.
Why should you buy a home right now? You’re going to find better deals, lower prices, and the best rates in history for buying a home. That sounds like an ideal time to enter the market!