Buy now while rates are low

Financial Planner Recommendation:  Buy Now While Rates   are Low

John Waggoner, an expert on personal finance says: “Investment opinions are like noses. Everyone has one. Buy stocks, sell bonds? Go long on steel, short on copper? Buy sheep, sell deer?” They can argue for and against most investment choices, but it’s pretty hard to argue against buying a house right now. In the past, you could buy low and watch prices go lower, but that’s not happening any more. Supply is the big news.  The number of homes on the market is shrinking.  Investors and early buyers have snapped up the more inexpensive homes on the market.  In prime areas, the inventory of homes available for purchase is very low. Many homes, once owner occupied, have been converted into rentals, decreasing supply even further. In parts of California and Florida, homes remain on the market for less than a month, or even weeks. The median single-family home price — half higher, half lower — hit its nadir in January, dropping to $154,600, the lowest since October 2001, according to the National Association of Realtors. That’s down from a high of $230,900 in July 2006. Existing-home prices rose in June to a median $190,100, up 8% from June 2011. Those are still 2003 levels. The good news is that the enormous supply on the market is shrinking. It takes a wearisome amount of time for supply to shrink, in part because there are people who have been wanting to sell their homes for many years, but haven’t been able to get the price they want. As prices rise, more homes come on the market. Nevertheless, Ned Davis Research, a respected institutional research firm, estimates that excess supply of houses on the market should be eliminated by the end of 2013. When excess supply dries up, people start building more new houses, which has the virtuous effect of reducing the unemployment rate and increasing the economy generally. Interestingly, mortgage rates remain very low.  The average 30-year fixed rate mortgage is about 3.6 percent, says mortgage giant Freddie Mac. Assuming you finance 80 percent of the median-priced $190,100 home, or $152,080, your basic mortgage payment would be about $691.  You can now get more living space for less than renting. Before you spend time searching for a home, check with your loan officer get to see how much of a loan you qualify for. Quoted in USA Today, Waggoner says there are other risks with homeownership, ranging from termites to ghosts in the hall closet. But if you’re planning to live in your home for a long time, it’s a fine time to buy.