Is Now a Good Time to Buy a Home?

When most people think of the American Dream, home ownership is a part of the equation. At least it was until the housing bubble burst in 2008. As home prices dropped and foreclosures rose, potential homeowners wondered if owning a home was worth the risk.

I’ll be honest. At times I have wondered if buying a home was worth the money we spent. Even though we bought after home prices started to fall, we’ve seen our home value drop to the point where we are underwater in our mortgage. From a financial standpoint it bothers me, but since we love where we live and aren’t looking to move, I try to ignore the fact that we owe more than our house is worth.

But the tide may be turning. Four years after the housing bubble burst, is now a good time to buy a home? If you’re looking for a home to raise your family, the answer may be yes! If you’re looking to invest, I’m not so sure.

Why would you want to buy a home now?

Low Interest Rates

In 2008 when we bought our home, we thought we got a great interest rate at 5.7%. Today that rate seems high. Mortgage interest rates are at their lowest since 1971, at the time of this writing. Today you can get an interest rate as low as 2.94% for a 15 year mortgage or 3.67% for a 30 year mortgage!

Those are great rates by anyone’s standards. With lower interest rates, you can afford to pay more for a principal payment. I’m all for more principal and less interest!

Low Housing Prices

The housing recovery around the nation is a bit uneven, but many areas are starting to see home prices rise. The key word here is “starting.” Even though prices are beginning to rise, they are still low compared to housing prices of four years ago.

I’m not convinced housing prices are going to rise to pre-2008 levels anytime soon, but historically speaking, housing is more affordable now than it has been in a long time. In addition, in many areas, the cost of a mortgage may now be less than the cost of a comparable rental. That’s always something to consider when deciding whether or not to buy a house.

Incentives to Buy

As part of the housing recovery plan, areas hardest hit by the mortgage crisis may have incentives available to entice potential buyers to commit to buying a home.

My mom lives in one of the hardest hit areas in Oregon. She recently bought a house and was given money for a 20% down payment and closing costs through a Neighborhood Stabilization Program grant. There are a lot of restrictions when you buy a home with such a grant, but a grant can be a huge help in accumulating the initial money needed for a home purchase.

To find out if there is a Neighborhood Stabilization Program grant available in your area, contact a mortgage lender.

Do low interest rates, affordable housing prices, and buyer’s incentives mean now is the perfect time to buy a home? I don’t think anyone can answer that question. If you’re looking for a house as a primary residence, and you plan to stay there for several years, now is a good time to buy. If you’re looking to flip houses and make money? I personally don’t think the housing market has recovered enough to take that kind of risk.

What do you think? Buy now, or continue to wait?

Photo via TaxBrackets.org.



Author

By , on Jun 11, 2012
Lynnae McCoy I'm Lynnae, wife of one and stay-at-home mom of two. I'm committed to getting out of debt by being frugal with my choices in life.

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{4 Comments}

  1. I come from a family of realtors and I’m always trying to figure out why people borrow so much money for a house. Even at 3.5% interest over 30 years you ending up paying twice what the house is worth. The realtors in my family tell me I shouldn’t see it that way, but it’s true. If you can’t afford it – don’t buy it.

  2. My house is 16 years old and we thought we got a good rate at 6.26%. If I was in the market for a new house, I would definetely buy now, but we just paid our house off and not looking for a new one. I would always buy as opposed to renting if possible.

  3. Fred:

    This is a good question, and it’s one I think many people are starting to ask themselves these days.

    I remember hearing that with previous home crashes, the market usually stays down for 7-10 years – that’s basically the amount of time it takes for everyone who went bankrupt or into foreclosure to get that part taken off their credit rating.

    Once those people get credit again, all those consumers start entering the market again, pushing up home prices.

    So while the 7 year mark from the house crash may not be around the corner, it isn’t that far away either…

  4. I’m not bashing your mom at all. She did what she needed to do. However, don’t you think that the Neighborhood Stabilization Grant is most likely a tax-funded governmental program that you and I will be paying toward for the next umpteen years? I feel badly when people can’t really afford a home of their own, but I don’t think the government should be using tax money to come up with all of these grant programs that everyone else has to pay for eventually.

    I do hope that people, though, can take advantage of the low interest rates on buying a home or refinancing a home these days! This last week, the 30-year rate went down to below 3%, which is fabulous – and would have been great if even you could have refinanced. However, since it sounds like you’re upside-down in your house, I don’t know that the banks will let people refinance in that situation.

    Hoping that your house will turn right-side-up soon!

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