Home Prices and Affordability – Is Now The Time To Consider Buying A New Home?
There's been a lot of news over the past several years concerning problems in the housing market, the mortgage industry and the economy. There still a lot of concern about when the market will turn around and start to recover.
I've been saying for the past 6 months or so that we have been in the "Perfect Storm" to buy a home with the combination of low home prices and low interest rates. It seems that the storm is starting to subside. Home prices in many markets are starting to show appreciation.
A recent report on CNBC it was reported that the National Association of Realtors (NAR) Pending Home Index jumped 7.3% in November after jumping after jumping 10.4% in October. (See the news clip below)
A recent issue of "Housing Predictor" has an article titled "Home Affordability Reaches 1971 Level". The article stated "Homes are more affordable to purchase than they have been since 1971 as a result of falling home prices, according to the U.S. 1970s House Department of Housing and Urban Development (HUD). Despite record low mortgage rates, the downward trend in home values is sustained in the majority of the U.S." It went on to say "With interest rates at historically low levels and markets across the country beginning to improve, homeownership is within reach of more households,” said Bob Nielsen, chairman of the National Association of Home Builders."
HSH.com has identified 5 Cities Poised For a Housing Pop. The Washington, DC metropolitan area is included in the list. For the Washington area the site says "A favorite large metro of Fox’s, the Washington, D.C. metro area encompasses two states (Maryland and Virginia) as well as the District of Columbia. With a median home price of $294,800, some experts believe home prices may drop by a percentage point or two in 2011. Expect small price gains--a percentage point or two--in 2012. Key to this metro is that the economy is driven by the federal government, which seems poised for continued growth. Unemployment in the metro is a very low 5.4 percent. The one negative: a cost of living that is well above the national average."
Moneyland.Time.com also looks at the Washington, DC metropolitan area in favorable terms. There recent post "The Real Estate Market that Defies the Trends" said "But in Washington, D.C., housing prices are up a smidgen (0.3%) from the previous month. More importantly, year-over-year prices have risen by 1.3%, a continuation of a happy trend in which prices increased by 2.6% from the year before that. When comparing housing markets in America’s big cities, D.C. appears to be having the strongest and steadiest recovery."
In an earlier article Moneyland.Time.com says that "Home Affordability Near Highest Level in 20 Years" The article states "As a result, families earning the median income of $64,200 could afford 72.9% of the homes sold in the third quarter. (Another reason I like this statistic is that it’s calculated using actual sales prices of new and existing homes, not list prices). That 72.9% is in real contrast with the way things looked five years ago during the boom, when the number dipped to 40.4%. Housing market bulls read the current high affordability number as a sign that there is buying power to bring the real estate market out of its slump, at least at current prices."
Last June Kiplinger.com wrote an article titled "Who Benefits From Affordable Homes?" The article stated "For many young adults, I believe this will turn out to have been a good time to buy a house or condo." It went on to say "But for many young adults who intend to stay put for several years, have good prospects of employment security and can qualify for a plain-vanilla fixed- rate mortgage, I believe this will turn out to have been a good time to buy a house or condo. And if the young home buyers are handy with tools and can find a fixer-upper at a great price, so much the better."
You might find the video Purchasing Power vs. Home Prices interesting:
And rents aren't getting any cheaper. According to USA Today "Apartment Rents Heading Higher for 3rd Year in a Row." According to the article "Apartment rents are expected to jump again this year as the U.S. economy creates more jobs and demand for rental housing grows. A 2012 increase would make the third straight year of rising rents. More annual increases are expected as apartment builders hustle to catch up with demand.
Here's a look at what CNBC.com has to say in a post titled "Renter Nation Rages On As New Reality". "Higher quality properties in the most desirable locations posted rent gains in excess of 5-10 percent, while class B/C properties, catering to lower income tenants, found it relatively more difficult to raise rents,” notes Victor Calanog, head of research at Reis.
Nowhere is that more evident than in the Washington, DC metro area where rents are way up across the city, and developers are rushing to erect new multi-family buildings and rehab old ones."
It went on to say "“Everybody wants to be in DC,” beams Richard Key, district manager for Camden Property Trust, one of the largest publicly traded multifamily REITs in the nation. “Whereas in other markets there are deals, when you get to DC area, all the REITs want to be here, and so we're all competing for the same piece of land, and that's driving the price up. That is really is a challenge for us.”
Key is convinced that there has been a fundamental shift in attitudes toward home ownership that will last for several more years. He is not concerned that the pendulum will swing back to buying, just as all that new rental stock hits the market around 2014. Camden has seen rents on its DC properties rise over 5 percent in just the past year.
So, are you thinking about buying your first home or moving up to a new home and have been waiting to see the bottom? Now may be a good time to jump off the fence and get into the game!
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