It’s certainly no secret that people are diving back into the real estate market. Home sales were up 20.7 percent over last year at the end of August in Lake, Porter, LaPorte, Jasper and Newton counties according to the Greater Northwest Association of REALTORS® (GNIAR). While prices gained 7.4 percent in the same time frame, they are still down from where they were before the 2008 market bust.
Like the economy, the housing recovery is experiencing more ups than downs, yielding an overall positive result. While mortgage interest rates have edged up slightly this summer, they continue to remain low when compared with historical averages.
August’s 4.46 percent rate with 0.7 points is still one of the four lowest recorded by Freddie Mac since 1971 – and the other years were the three preceding this one.
In fact, for those of you who have forgotten or are too young to remember, take a look at theses annual averages:
• 5.04 percent with 0.7 points from 2009-2005
• 5.84 percent with 0.7 points from 2004-2000
• 7.44 percent with 1.0 point from 1999-1995
• 8.38 percent with 1.8 points from 1994-1990
• 10.32 percent with 2.1 points from 1989-1985
• 13.88 percent with 2.5 points from 1984-1980
• 11.20 percent with 1.6 points from 1979-1975
• 9.19 percent with 1.2 points from 1974-1971
Try plugging a few of those numbers into a mortgage calculator and see if you still think rates are high right now.
If history is any indicator, today’s low rates won’t last forever. So whether you want to get in the game as a first-time buyer, need to upsize or want to downsize, the timing couldn’t be better. There are plenty of options out there for you to explore financing, and once you’ve determined a budget, it’s time to think about the type of house you want.
For example, some home buyers will take nothing less than a new home – a high-performance blank slate with everything untouched by previous owners. Theses buyers typically look at a median of 6 houses before purchasing their new home.
Others are willing to work with something that’s already lived in because they want a home with character in a desirable established neighborhood. These buyers typically look at a median of 10 homes before purchasing.
Those findings were reported in the latest American Housing Survey (AHS), a biennial survey of housing units, conducted in odd-numbered years by the Census Bureau for the Department of Housing and Urban Development. The 2011 AHS shows that about 6.8 million households bought a home in the previous two years, about 1.6 million less than the 8.4 million households that were reflected in the 2009 AHS.
Other key findings from the 6.8 million home buyers:
• Reflecting the severe downturn in new construction, only 8 percent of home buyers purchased a new home. Yet, 55 percent of prospective and recent buyers say they would prefer to buy new.
• Forty-six percent of home buyers were purchasing their first home.
• Overall, buyers had a median income of $64,998—$59,964 if they were first-time buyers, and $81,715 if there were buying a new home.
Key findings about the homes they purchased include:
• The median value of the homes purchased was $170,000, down from $180,000 in 2009. The median value dropped $35,000 between 2007 and 2009, but only $10,000 between 2009 and 2011.
• The median value of new homes purchased was stable at $230,000 in both 2009 and 2011. The median value of a home purchased by a first-time buyer is $147,000.
• The median size of a new home purchased was 2,100 square feet, and the median size of an existing home purchased was 1,750 square feet.
• Buyers say they would prefer a 2,200 square foot home. This is slightly under the median size of new single-family homes that have been started since the beginning of 2011.
While it comes down to personal preference since there are always pros and cons involved in the purchase of any home, buyers today are much more in-tune with the long-term financial impact of their decision. For those looking to maximize their investment, there may never again be a better time to buy a home.
Ultimately, long-term value depends more on location than the age of the property.
One thing that buyers with a home to sell need to consider as consumer confidence continues to improve, is the fact that more people will likely be demanding “move-in ready” homes that feature updated kitchens and baths plus energy efficiency. This trend has been firmly established over the last year as buyers across the board are showing their preference for new construction and getting into bidding wars over existing properties that are in top condition.