By WILLIAM E. SUMMERS V
Senior Vice President
of Jefferson County
According to a 2011 Gallop poll published by CBS MarketWatch, 67 percent of Americans believe that now is a good time to buy a house.
Why aren’t more people rushing back into the housing market? After all, interest rates are still at historically low levels, and home prices have declined in many areas, including Louisville. All this makes me wonder why housing sales aren’t climbing faster.
For some, it’s uncertainty about jobs and the economy. Others cite uncertainty about getting their home financed. And some still wonder if housing prices will go even lower. According to Gallop, many Americans are still worried about their home values, with 27 percent saying that home prices in their communities will fall this year and 42 percent are concerned that their own houses will lose value. Only 21 percent believe home prices in their areas will increase.
Many economists, like Mark Zandi with Moody’s Analytics, say these concerns are overblown. “Everyone’s re-evaluating more carefully whether they should own a home or not,” Zandi said. “But for the vast majority of Americans, homeownership is still the right thing.”
Consider this: With a fixed interest rate, your home payment never goes up, but your rent will climb in most places. And even if prices don’t rise that much – if you pay down the mortgage every month, and you don’t take out a big home-equity loan – there’s an automatic savings for the future built into owning.
It’s the people who dive back in that benefit in the long run.
“The other thing to consider is that like any asset – after a crash, after prices have fallen very quickly – everybody is very nervous and reticent to dive back in, but it’s the people who do who benefit in the long run,” he said.
“If you plan to live in your home five or more years, then you should really consider buying a single-family home in most parts of the country at this point,” Zandi said.
Renting No Cheaper than Owning
While it’s been getting cheaper to own a home, that is not the case with renting. Gleb Nechayev is a housing economist with CBRE Econometric Advisors, a real estate research firm in Boston. He said the monthly cost of renting or buying a home is about the same. That one-to-one ratio is the lowest in 25 years!
So here are the facts. The cost of renting is increasing and may exceed the cost of ownership. Current interest rates make long-term fixed-rate loans very attractive for borrowers, especially those who believe they will be living in their home for at least five years. Shop online to get a general idea of what’s available. Then, ask a realtor to show you homes that interest you. If you have any other questions, Central Bank is happy to help. It’s time to get moving. Those who lead get the best bargains!
William E. Summers, V, is senior vice president of Central Bank of Jefferson County. Contact him via email at email@example.com.