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Make 2015 The Year Of The Homeowner

The year of the homeowner

Having a little piece of the world to call your own has always been a cornerstone of the American dream. Couple it with a picket fence and a dog, and you’ve got a perfect Norman Rockwell vision of America. This all begins with home ownership.

 Yet, for many people, this has been a dream deferred. Per a post on the Wall Street Journal's website, in 2014, the percentage of Americans who own their own home was just under 64%.

There are many reasons for this trend. Many young people, burdened by student loans and struggling to find stable employment, have postponed home buying. After the real estate bubble burst in 2008, many families watched as their assets evaporated. Job loss, mounting debt and depleted savings have put home ownership on the back burner.

Fortunately, things are looking up. Jobs are being added to the economy and the long financial night may finally be over for many Americans. There has never been a better time to own a house! Here are three reasons why now is the time to buy.

1.) Renting can be high!

For many Americans, the decision not to buy a house is motivated by their current housing affordability. They’re happy where they are and there’s no incentive to move. What could go wrong?

Well, demand for apartment rentals has been increasing, and that trend looks like it will go well into the future. The vacancy rate of rental properties in America was just 7% in the fourth quarter 2014, the lowest point in more than 20 years. As more millennials find jobs and move out of their parent's house, that rate will continue to fall. New household formation, or the rate at which new addresses are registered, shot up to 1.7 million in the same period. This increase will apply continuous upward pressure on rent prices.

New construction in rental properties will not alleviate these concerns in time. It will take years for the new buildings to be habitable. In the meantime, the window to own will close. For more information, see "Rents Will Stay High for Years" on Zillow.

 

2.) The price will keep going up!

The traditional advice about home ownership is that it’s the best investment you can make. Over time, the value of your home will increase. For many people, a house is the biggest piece of their net worth.

The converse is equally true. The longer you wait to get into the housing market, the more expensive it can be. The median house price now is $178,400. By May 2017, experts agree the price will have increased to nearly $196,000, which is past the peak pre-recession price.

Confidence in the housing market is clearly on the rise. Roughly 5.2 million people plan to buy homes this year. That will keep housing prices on the rise looking forward.

3.) Rates are still low…

Low interest rates are the biggest appeal to potential buyers. If it’s cheaper to borrow, a mortgage will ultimately cost less in the long run. Mortgage rates are currently stalling around 4% for a 30-year mortgage. Experts expect those rates to rise to 5% by the end of the year. That may not seem like much, but a 1% increase in mortgage rate increases the cost of a 30-year loan by about 11%.

The low interest rates were an effort by the central bank to aid economic recovery. Now that recovery is well underway, it’s only a matter of time before rates are raised again. Buying now can mean tremendous savings. Now’s the time!

For more about this topic, consider the following posts and information:

PrimeWay FCU: Home Buying Simplified
New York Times: 
Why the Homeownership Rate is Misleading. 
Zillow: 
Getting Mortgage Easier than 2014.  Housing Confidence January 2015.
Fox Business: 
4 Reasons to Buy a Home this Spring