For any buyers who are still sitting on the fence thinking about buying a home, they should take into consideration the following three reasons why they should look into buying now. Sure there are plenty of doom and gloom reports out there about double dips, and why home prices may decline more in the near future. But, with record low rates, low home prices and plenty of inventory for buyers, history will show that real estate is still a fantastic long term investment and there has never been a better time to buy a home than today.
1. A historical look at interest rates
Check out this mortgage rate chart for the past 40 years. The average rate for the past 12 months was over 5%, the average rate for the past 10 years was over 6.13%%, the average rate for the past 20 years mortgage rates was over 7%, in fact rates were even over 18% back in 1981. Current mortgage rates at 4% for qualified buyers on a 30 year conventional loan represent a historic opportunity that cannot be ignored.
2. Decreasing Home Prices and a lot of inventory
It all comes down to supply and demand, and right now the supply is much higher than the demand making it the perfect storm for buyers. In the last 2 days in San Diego County there were 402 NEW listings and 759 PRICE REDUCTIONS. That is a lot of new homes on the market, and whole lot of price reductions! Buyers have a lot to choose from right now and sellers know that they have to price their property competitively in order to get it sold. In San Diego we have a pretty even ratio of traditional sales, REO's, and short sales making up our current inventory.
3. Real Estate is still the best long term investment to make
A look at the chart below shows the evidence of this over time. Even though real estate has become a questionable purchase for some people, especially if they bought a home after 2005, real estate as an investment still outperformed the stock markets considerably in the last decade, and has historically outperformed the stock markets and other investments for many decades before this.
So, even though there may still be a decline of 3-5% in home prices in some markets still to come, when you factor in today's historical low rates purchasing a home today at 4.25% is still less costly overall than purchasing in a year with a rate of say 5.5% or 6% when you are comparing the total cost of the home and the loan over 30 years. It is ultimately these total cost analysis figures that a buyer needs to understand amidst the negative reports they may be seeing and reading about, so they can make an informed decision about buying a home today.
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