 |
|
|
|
This is the year for first-time homebuyers
The New Year brings promises of hope after an unsettling ending to 2001. For people who may have added buying a home to their list of New Year's resolutions, it's a perfect time to evaluate whether 2002 is the year to buy.
After several years of record home sales, a slowing economy, due in part to the events of September 11, have left some consumers unsure whether they should venture into the home buying market. According to most reports, the housing market remains strong by historical standards and is expected to continue to be strong through most of 2002.
"The market is beginning to sizzle and it looks like we are going to see an upward turn in prices as we usher in springtime," said Saratoga Realtor Kathy Stakey of Coldwell Banker. "The inventory has been shrinking lately and to have any selection at all, I believe buyers need to move ahead."
While the decision to purchase a home is usually a long-term decision that isn't impacted by current events, Realtors are citing near-record-low mortgage interest rates and improved housing inventories as solid reasons to consider buying now. First-time buyers are finding the current housing market very attractive, especially when interest rates are so affordable. Since the hot real estate market during the dot-com boom left many first time buyers out in the cold, the coming year promises a better balance between buyers and sellers. Buyers are likely to find a less competitive bidding situation.
With interest rates so low, monthly payments are also lower for consumers, giving buyers additional purchasing power. It is probably cheaper to finance the purchase of a home today than at almost any other time in recent history. According to the National Association of Realtors' housing affordability index, homes are more affordable than any time since 1973. More affordable housing opens the door to new housing opportunities for many Americans and interest rates are playing an important role.
Watching the interest rate dance will be important in the coming months. Interest rates may be back on the rise since traditionally a rebounding economy leads to higher interest rates. The National Association of Realtors projects 30-year fixed rate mortgages to rise to 7.2 percent by the second half of 2002. The theory is that investors will reallocate funds in their portfolios as the economy strengthens. When funds move away from mortgage products, mortgage interest rates will rise. Since economic forecasters are calling for a rebound in the economy by the spring of 2002, locking into today's low mortgage interest rates is another reason to get serious about buying in the current market.
Improved inventory is another reason to jump into the market, especially for buyers who were shut out of the hot market over the past few years. The level of housing inventory hovered near historical lows, averaging around a 4.5-month supply over the last year, causing multiple buyers to engage in bidding wars that drove up prices and froze out first-time buyers. Today, buyers can choose from a better selection of homes, across most price ranges.
When considering whether to buy, buyers should know that the purchase of a home is usually viewed as a stable investment. The home is a major source of wealth for most Americans, and it provides an important source of funds to help with emergencies and to make big-ticket purchases. In a recent National Association of Realtor's survey, three out of every four homeowners said they have more wealth in the equity of their homes than they do in their investment portfolio. A study conducted by the Federal Reserve also shows that home equity comprises a larger share of household wealth than any other financial asset.
While the stock market has shown tremendous volatility, especially in the past two years, home appreciation, on the other hand, has been steady. In fact, home prices have never declined nationally on an annual basis in the 33-year history that the National Association of Realtors has tracked the data.
Home prices typically increase at the general rate of inflation, plus one or two percentage points, although growth is generally less during periods of recession. The national average annual increase, since record keeping began in 1968, is 6.3 percent. This means that most homebuyers accumulate enough equity in their home to trade up to a larger home in three to five years, and most people own their home for a period of seven years.
For first-time buyers, taking a look at the amount of money spent on rent versus mortgage payments can also be an eye-opening experience. Even in cases where a mortgage payment is higher, homeowners are saving money in the long run as rents probably will escalate over time. And then, there is the benefit of deductions at tax time.
Of course, a professional can help weigh the pros and cons of whether the timing is right to buy. For first-time buyers who are considering making the transition from renting to owning, it's important to find a knowledgeable Realtor who can assist in all aspects of the transaction. In addition to finding the right home, a real estate professional is a good source for information on loan programs and other services that specifically fit a client's needs.
And if selling a home is on the New Year's resolution list, finding a local real estate professional who understands the current housing market is essential. In addition to providing comparable home prices in the neighborhood, the agent can help qualify potential buyers and then negotiate the best deal.
Whether buying or selling, the New Year is a perfect time to evaluate all the options. Making a New Year's resolution come true could be the best move for the year 2002.
|
|
|
|
Saratoga, California Since 1955
