Recently, a first-time home buyer asked "Is now the time to buy my first home?" Well, there is no simple answer to this complex question. Real estate professionals aren't necessarily the best equipped to predict future economic conditions. However, real estate professionals do monitor current trends as well as historical trends in local, regional, and national real estate markets.
NATIONAL TRENDS INDICATE THAT THE TIME TO BUY IS NOW
Presently, there are three key national trends which provide support for the position that now is the time to buy:
Housing Affordability Index: The National Association of Home Builders recently released its Housing Opportunity Index which showed that 72.3% of all new and existing homes homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000 using standard underwriting criteria. Compared to 2008, this represents a strong positive change from 55% in the second quarter of 2008 to 72.3% in the second quarter of 2008.
Interest Rates: The average interest rate for a fixed 30 year loandipped below 5% in 2009 and is now at historic lows. Since 2000, interest rates have declined from over 8% to below 5%. In practical terms, this means that purchasers can afford more home for the same monthly payment. For example, a purchaser today who borrows $200,000 at a fixed 30 year interest rate of 5% would pay a monthly payment of $1073. In contrast, a purchaser who borrowed $200,0000 in 2000 at a fixed 30 year interest rate of 8% would have paid a monthly payment of $1467. Or stated differently, today's purchaser can obtain a $200,000 loan at the same monthly cost as what a purchaser in 2000 would have paid for $165,000 loan.
National Median Prices: Since 2006, the national median priceshave declined. In 2009, national median prices appear to have stabilized with a slight increase in the second quarter of 2009. Now, there is no guarantee that prices will rise in 2010 and beyond. However, it does appear that prices have stabilized and may show a modest increase in 2010.
THE $8,000 FEDERAL FIRST-TIME HOME BUYER TAX CREDIT
The $8,000 federal tax credit for the purchase of new homes by first-time home buyer represents a unique opportunity. It is especially attractive for young professionals and recent graduates. Depending on the loan amount, the tax credit could be used to pay between 7 to 20 monthly loan payments for the typical first-time home buyer. Here are some examples:
With favorable pricing, historically low interest rates, and the federal tax credit, I can only conclude that NOW is the time to buy for the average first-time home buyer.
INTERESTED IN PURCHASING YOUR FIRST HOME? Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or send an e-mail to Ryan@PREASignatureRealty.com to discover how easy it can be to purchase your first home.
PREA Signature Realty is a full service brokerage located at 1709 Park Avenue in the Lafayette Square neighborhood of the City of St. Louis. PREA Signature proudly serves the following city neighborhoods: Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.
The opinions expressed herein represent the opinions of the author only and do not reflect the opinions of PREA Signature Realty. All photos and written content were produced by PREA Signature Realty. All Rights Reserved - PREA Signature Realty (2009). This content may not be reproduced or reprinted, except for Active Rain re-blogging, without express written permission of PREA Signature Realty.
Harry - As you can see, I think it is a great time to buy. Thanks for the Phoenix report. We are seeing properties still moving in the first-time buyer price ranges. Pretty good time to list properties from $75 to $200,000 in my market.
Hi Ryan! EXCELLENT advice! It IS a great time to buy and to be able to buy 35% more home than in 2000 is certainly remarkable! (Did you mean 1999 or 2000 here? "In contrast, a purchaser who borrowed $200,0000 in 2009 at a fixed 30 year interest rate of 8% would have paid a monthly payment of $1467.")
Debe - Thanks for catching that... When it comes to first-time purchasers, we try to get them to focus on interest rates, pricing, location/neighborhood, and resale. Sometimes people fixate on only one part of the equation. I hope everything is well in Charlotte.
Ryan, I call it the Perfect Storm....low interest rates ( for now) plenty of inventory. You have laid this out perfectly and I will reblog for Ann Arbor folks in a few days. Love the graphs.
Ryan, I agree with Missy. I have posted many blogs about Now being the time but none as well laid out, detailed and with visual graphs. It is suprising to see the opportunities spelled out since 2000. I bought my first home in 1987, interest rates were high and had been for some time, in my adult life I have never seen rates this great, inventory and prices this great. I will reblog as well for my market area. thanks!
Missy - It is a perfect storm. Some people don't realize it. We see people focusing only on price and not really seeing the "value" proposition offered by affordable homes, interest rates, etc.
Debbie - Thanks for the reblog. I hope it helps. I have found that the graphs drive home the point better than simply using numbers or percentages. My top posts in terms of outside readers have all been recent market graphs. It seems that people tend to see it and understand it better when it is laid out. I started getting e-mails from consumers based on the months of mortgage payments post. It seems that these figures resonated with purchasers.
Mara - I like graphs so customers can see the trends up or down or flat. I also like to point out differences. Often, people will say how bad x is. I see alot of positives in this market if you are buying a first home, purchasing for investment or simply shopping for good values.
A Blog for New Home & Other Sales Professionals and for Sellers and Buyers Interested in City Living
PREA Signature Realty proudly serves the communities of Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.
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All signs are a go to purchase real estate. Phoenix is becoming a seller's market as the market continues to change.