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  Why is everyone nagging you to buy a house these days? When real estate values were crashing—prices dropped nearly 33 percent from the second quarter of 2006 through April 2009—renting that apartment was darned savvy. And since home values are projected to drift lower in 2010, getting into the market now may seem like financial suicide. But the truth is, even the worst housing slump since the Great Depression can’t remove the long-term benefits of homeownership. Meanwhile, the combination of lower prices, cheap mortgage rates, and a special tax perk from Uncle Sam has produced some of the most favorable conditions for home buyers in years. And without the need to unload one property to purchase another, first-time home buyers will find themselves in a position of particular strength this year.

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Although the real estate bust wiped out nearly $6 trillion of housing wealth through November 2009, the financial advantages of homeownership remain. “When you own a home, you are slowly but surely building strength in an asset that you can utilize to your great benefit at some point,” says Keith Gumbinger of HSH.com. Homeowners who accumulate enough equity can borrow against the property to put Junior through college, or they can sell it down the road to purchase that retirement bungalow in Boca Raton, Fla. And federal tax breaks make home mortgages less costly than other forms of debt. “It is a long-term forced savings plan,” Gumbinger says.

Meanwhile, the housing meltdown and the federal government’s response have created some compelling reasons to consider jumping into the market this year. First, lower prices make buying more tempting. By late 2005, breezy credit and speculative fervor had pushed the national median home price to median household income ratio—a key measure of real estate affordability—to more than 2.3, according to Moody’s Economy.com. That’s significantly higher than the 1.9 average for the 15-year period that ended in 2003. But by the third quarter of 2009, plunging prices had dragged the ratio down to 1.67. And although Mark Zandi, the chief economist at Moody’s Economy.com, expects an additional 10 percent decline before prices hit bottom late this year, the likelihood of a sizable drop is much smaller today than several years ago. “The risks to all homeowners are much lower now because house prices are a lot lower,” Zandi says. “You’re not going to see the kind of price declines that are really going to cause you problems.”

Mortgage rates are sitting near all-time lows, with 30-year, fixed mortgage rates falling to an average of 4.88 percent in November from 6.09 percent a year earlier. And while they’re likely to increase, rates should remain attractive throughout 2010, experts say. If that’s not enough, Uncle Sam is handing out tax credits worth up to $8,000 for qualified first-time home buyers who close the purchase of a primary residence by the end of June. “You have got some of the best housing affordability conditions in many markets that [buyers] have seen certainly in their lifetimes—and perhaps even their parents’ lifetimes,” says Mike Larson of Weiss Research. “If you are not encumbered by a previous home you are trying to sell, this is great for you.”

Jobs first. Many Americans are taking advantage of these conditions to become homeowners, with first-time home buyers accounting for more than half of home sales in November. But as we learned during the housing bust, “because everybody’s doing it” is a terrible reason to buy property. Instead, would-be buyers must first determine whether or not it’s the right time for them. And that means they must take a critical look at their employment situation. Although the economy is showing signs of life, the national unemployment rate stood at 10 percent as the year began, and it is projected to move higher. Since a steady income stream is essential to homeownership, only those with sound job security should pursue a home purchase.

Second, remember that all those headlines about the national housing market aren’t nearly as important as what’s going on in the area you are looking to buy into. The trajectory of home prices will vary a great deal from one place to the next. Home values in Tacoma, Wash., for example, are expected to increase more than 40 percent over the next five years, while prices in Atlantic City are projected to fall more than 10 percent, according to Moody’s Economy.com. Markets with a diversified economic base of faster-growing job providers—like high-tech or business service firms—are in a good position to experience growth in employment, population, and wages, says Celia Chen, the senior director of housing economics at Moody’s Economy.com. Such factors will help stimulate housing demand and juice property values over the long term. Check in tomorrow for part two of this informative  series!

Interested in recieving more information?  Give me me a call at (714)626-888O  ext 117 or visit http://www.yourfullertonhome.com/ .

Source: us news