We have been hearing the last year or so, “it’s a great time to buy!” Let’s look at why this might be true even more today than ever before. It is easy to understand when prices are falling; it's easier to afford things, and it feels great to get something on sale.
Steve Harvey’s blog paints a pretty accurate description with regards to real estate, “There’s cost vs. price and you have to be able to look at the overall picture. Maybe the time to buy a home is in a difficult market. You shouldn’t be worried about price; you should be worried about cost. Cost is determined by price and interest rates. If the price falls but the interest rates go up, then cost may be greater. The price may sound good, but interest rates impact the cost in different ways. Even if prices fall, they would have to fall 10 percent to make up for just a 1 percent increase in interest rates to get the same mortgage payment.According to the Consumer Price Index, rents for a primary residence on average have increased a little more than 3 percent per year for the last ten years. Some experts are projecting rents to increase 5 percent annually over the next several years."
We, here in Loudoun County and most everywhere in Northern Virginia have seen the inventory of rental properties at an all time low. If you look at buying a home with a fixed 30 year mortgage rate, you know what your payment will be for the next 30 years; at least for now, you also enjoy a significant tax savings when paying mortgage interest.
We all know and realize why we buy homes and the added benefits of achieving this American dream. There is more of a sense of community among homeowners than there is with renters.
Studies have shown that homeowners have a higher participation in local volunteer activities; participate more in local political activities and organizations; have higher voting rates; and are more involved in self-help activities (like the PTA and neighborhood crime watches) than those who rent.
Homeowners do not move as frequently as renters, therefore providing more neighborhood stability. This helps reduce crime and support neighborhood upkeep and value.
Let’s look at home-ownership as an investment. In 1998 the average homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Even in these toughest times, the wealth of the homeowner is still over 30 times that of renters.
Now, home-ownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is home-ownership.
In Pew Research Center’s The Home as an Investment Survey, 81 percent of Americans agree that buying a home is still the best long-term investment a person can make.
People have fear when it comes to buying. This fear comes from not understanding and it can cause paralysis. The best consumer is one who is educated and who wants to learn and understand the local real estate market. Owning a home now might not be good for everyone, but if not now, maybe in the future when it's the right choice for them.