Wall Street Journal Says, “IT’S TIME TO BUY THAT HOUSE!”

October 13, 2011

 The Wall Street Journal says it’s an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip).

The WSJ points out that today’s mortgage rates make homes more affordable then they have been any time in the last five decades.  The article points out that in many markets, it’s less expensive to purchase a home than to rent and that mortgage rates are so low now that houses in many markets look like bargains.  With 30 year fixed interest rates covering around 4%, they are less than half the average in 1971!

The article continues, “As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index’s historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today’s buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpier payments.”

An example, the median home in the Colorado Springs market costs $230,000. With a 20% down payment and a 4% mortgage rate, a buyer’s monthly payment would be about $1098. Rent for a comparable house would be more than $1600 a month, according to data provided by local Real Estate professionals.

The WSJ recognizes that many would be buyers have bought into the “We can’t get a loan” jargon but points out that long-term data on down payments and credit scores suggest conditions are “more normal than many buyers think,” according to Stan Humphries, chief economist at Zillow. “If you have good credit, a job and a down payment, you can get a mortgage,” Mr. Humphries says. “There’s more paperwork and scrutiny than five years ago, but things are pretty much like they were in the ’80s and ’90s.”

Another example, the WSJ points out that for investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets (i.e. stock market) is to divide 1 by the price/rent ratio, resulting in a rent “yield.” The median market’s rent yield is 9.3%. Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor’s 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive!

The WSJ, as most financial analysts, advises against property “flipping” as house price gains simply aren’t that exciting in today’s market. Research by Yale economist Robert Shiller suggests “houses more or less track the rate of inflation over long time periods. Houses aren’t the magic wealth creators they were made out to be during the bubble.” But when prices are low, loans are cheap and plump investment yields are scarce, buyers for a family home or long-term investment should not hesitate to jump in the water! Click here to read the entire WSJ article.

If you’re ready to jump in the water and take advantage of the best time in the last fifty years to purchase a new home in Colorado Springs, consider Campbell Homes. Since 1965 Campbell Homes has been building energy efficient stylish and comfortable new homes for sale in Colorado Springs in the safe and secure locations and master planned Colorado Springs Communities with excellent community amenities and the best schools in Colorado Springs. Heck, we’ll even throw in a free finished basement (but, only until the end of the year)!

Starting in the low $200s, NEW Campbell Homes come standard with peace of mind and a guaranteed move in date in seven Colorado Springs locations. Our model homes in Colorado Springs are open daily to 6 p.m.  Or, for additional information visit our online sales office at www.CampbellHomes.com.