While the tax credit (which ended on May 1, 2010) was a nice, very public incentive, but there are a number of factors that buyers should consider post tax credit. It is still a great time to buy a house because
1) Many neighborhoods have suffered distress from foreclosure properties in their midst. That cycle is seeing some shift from distressed to rehabbed. Neighborhoods are seeing previously run-down, maybe even boarded-up properties, turn over to owner occupants or to investors who are fixing up for their own use or to sell for a profit…and the neighborhood is better off for it! Certainly the corner has not been completely turned, but in many neighborhoods it is easy to see that the road ahead is positive, not spiraling downward. This should inspire enough confidence in buyers to recognize and act on great opportunities when they see them.
2) Real estate has always been a good long term investment. Though prices in many markets will continue to feel downward pressure in 2010, in the long term real estate will eventually return to historic returns. Even in the past decade, real estate was a better investment than the stock market as shown by the table below:
3. The gap between monthly rents and mortgage payments is at its lowest level in almost 20 years. In some markets, the difference can be less than $100, according to a national study conducted for The Associated Press by Marcus & Millichap Real Estate Investment Services.
The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent is down to $256. The last time that gap was anywhere near that small was in 1993 when it fell to $264, according to the study.
4. In most areas of the country, housing average sales prices are at approximately the 2003 levels back before the huge increases of the 2004-2006 boom. So with 2003 prices and 2010 interest rates, the net to the buyer’s bottom line is impressive!! Check out these charts from one of the best real estate analysts in the business, Steve Harney’s blog http://kcmblog.com/2010/04/26/the-price-is-the-same-it-just-costs-less/
5. Interest rates are at historic lows. Interest rates in August of 2003 were over a full percentage point higher than they are today. We can see in the table below that, even though you would pay the same price for a house today, your mortgage payments on a $200,000 loan would be $145.61 less each month. That is an annual savings of $1,747.32. Over the life of a thirty year mortgage you would save $52,419.60.
*Information from http://comey.com/article.asw?section=blog&article_id=23
Avg. Sales Price: 379,000
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