Historically low-interest rates and attractive home prices have combined to make the current housing market one of the most affordable in decades. While patience can sometimes be a virtue, for those who think a home purchase is in their near future, waiting just doesn't make cents.
Figures from the National Association of Realtors shows the favorable gains that recent first-time buyers have enjoyed in housing affordability. The average sale price of a typical starter home dropped nearly 24 percent from 2007 to 2010. That equates to a savings of $40,000 on the purchase of a home.
The same report shows that interest rates dropped from approximately 6.5 percent to under 5 percent to make a home purchase even more affordable. As a result, a first-time buyer's monthly payment dropped nearly $400 from $1,083 to $709 and the income needed to qualify to purchase a starter home dropped from $52,000 in 2007 to $34,000 today.
While holding off on buying might have been a good strategy a few years ago, today's market conditions are just too favorable to wait for a better opportunity that isn't likely to come. With home prices appearing to now stabilize or increase in many markets, and with signs pointing to interest rates on the rise, it seems likely that a home purchase will cost more in the future than it does today.
For example, the monthly payment to purchase a $300,000 home with 10 percent down and a 30-year fixed mortgage at an interest rate of 5 percent would cost $1,449. Yet, if rates rise to 6 percent and home prices increase 5 percent, that same purchase would end up costing an additional $3,000 a year.
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