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.
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!
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.
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.
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I'm just an average mom, trying to live a frugal life and get out of debt. I write about things that have (and haven't) worked to improve my family's financial situation. What works for me may or may not work for you, and you should always consult a financial advisor before making important financial decisions.
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