Now is the Time to Buy!

Why is this a good time to buy a home?

An Unprecedented Window of Opportunity

Given the uncertainty in the financial markets, for those wondering if this is a good time to buy - the answer is simple: Yes. It's a good time to buy. An outstanding selection is another reason that it is a great time to buy. Available inventory is probably the best it will ever be, providing buyers with a great choice of homes. Many builders have inventory that is " move-in ready", and they may offer upgrades or other incentives to seal the deal. Likewise, owners of existing homes who are looking to trade up or relocate are ready to bargain. As a long-term investment, homeownership remains a solid investment for individual households, with a track record that can compete with any other purchase in terms of its real benefits. The home building industry will need to construct more than 17 million new homes in the next decade to keep up with expected new household formations, which bodes well for future house price appreciation.


All Housing Markets Are Local

Homes have become more affordable. Housing prices on a national basis have been losing some ground - a development that sounds far worse than it actually is. At the height of the housing boom, home prices were rising at their fastest pace in history. In the hottest markets, prices doubled in a matter of years. Clearly, this pace was unsustainable. It didn't take too long before prices rose to unaffordable levels in parts of the country. When it comes to housing, it is important to remember all the markets are local. Home prices vary considerably from one market to the next.


Timing the Market is Unreliable

Housing has always been a cyclical business, with its ups and downs. As surely as the market has slowed today, it will start picking up speed again. Potential homebuyers who try to "time the market" in hopes of buying at the trough are likely to lose out. Here's why: Just as no one can accurately predict the peaks and valleys of the stock market, the same holds true for housing. Fence-sitters waiting for the absolute best deal could end up literally waiting for years, and most likely their guess on market timing would be wrong. Meanwhile, those who buy now will have a home they can call their own and reap the long-term gains of home price appreciation. For example, those who purchased homes in the early 1990s during the last big economic and housing downturn came out as big winners. The median price of a new home in 1991 was $120,000. In 2007, it was $247,300 - more than double in price.


Advantages of Homeownership

Consumers who take advantage of this excellent buying climate to purchase a home will find that it is a great long-term investment.

Buying a home is the largest investment most families will ever make and homeownership is the single largest creator of wealth for Americans. It allows families to build financial security as the equity in their homes increases. As homeowners repay their mortgages, their debt declines, while overall wealth and equity in the home grow.

Although local housing markets periodically adjust according to overall economic conditions, over the long term, real estate has consistently appreciated, and we appear to be approaching the bottom of the current downswing. The rate at which home values have been declining is slowing down. Once we turn the corner, home values will start edging up and the long-term outlook is very promising.

Remember, on a national level, home appreciation has historically risen 5-6 % annually. Five percent may not seem to be much at first, but take a look at the numbers. If you bought a $200,000 house and put 10% down, that would be an investment of $20,000. At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $20,000. Your annual " return on investment " would be a whopping 50%! In contrast, putting the same $10,000 in the stock market and registering a similar 5% gain, (even in today's volatile market) would only yield a $500 return on investment.

The big difference in returns is a result of " leveraging" - putting down a small amount of money to earn the biggest return. This is especially important for first-time home buyers. Entering the market now starts you on the road to home price appreciation. The profit from selling a "starter" house will enable buyers with growing families to afford a bigger home in the future.

Compared to other investments, such as stocks, a home is a relatively stable investment. Homes tend to increase in value at a steady, reasonable pace while alternatives such as the stock market can be extremely volatile. For example, the median-priced home in 1996 was worth $140,000. Today, that same home would have gained more than $70,000 in value. The real value is worth even more, simply because the homeowner has paid down a significant portion of the mortgage in the interim.