A look back at the 2010 home market tells a story of a first-half sales surge boosted by tax-credit incentives, followed by gradual signs of home-price stabilization and rock-bottom mortgage interest rates that made homeownership more affordable than ever.
The outlook for the first half of 2011 sounds a bit like the second half of 2010, with the added benefit of the continued economic recovery, so more buyers will be comfortable taking advantage of the favorable marketplace. Bargain hunter alert: In the Pocono region, first-quarter foreclosures are expected to continue at a record-setting pace, and are trending toward newer, higher-end homes. My personal perspective is that buying & selling interest continued at a surprising pace through the holiday season –my last transaction actually closed on 12/30 – and based on calls & client interest I expect the trend to continue through the normally quiet first months of 2011.
Overall, home affordability remains at historic levels. The National Association of Realtors (NAR) Housing Affordability Index currently shows that a median-income family with a down payment of 20 percent has 184.2 percent of the income required to purchase a median-priced home. Despite recent upticks in mortgage interest rates, historically low rates remain an important component of affordability.
“Low interest rates mean real money for today’s homebuyers,” explains NAR President Ron Phipps. “Buyers who purchased a median-priced home five years ago with an FHA mortgage requiring a 3 percent down payment would have a monthly mortgage payment of $1,650. With today’s interest rates and median home prices, that same buyer would pay $1,150 per month — a $500 savings. That’s a savings of $6,000 per year.”
Late last year, rising foreclosures and concerns about foreclosure processes led to questions about whether owning a home was a good idea at all. “Homeownership didn’t create the foreclosure crisis — Wall Street greed and irresponsible lending practices did,” Phipps says. “The decision to own a home is a very personal one, but over the long term, owning a home is one of the best ways to build long-term wealth, in addition to providing numerous social benefits that include reduced crime rates, improved childhood education, and increased stability. After all, a fixed-rate mortgage might last 15 to 30 years; renting is forever.”
Thanks to the mortgage interest deduction, homeowners also enjoy significant savings at tax time. As Phipps explains, “For example, a family who bought a home this year with a $200,000, 30-year, fixed-rate mortgage, assuming an interest rate of 4.5 percent, could save nearly $3,500 in federal taxes when they file next year. That’s money they could use to pay down other debts, supplement their children’s college savings account, or put into savings themselves.” Threats to limit or even eliminate this important benefit have drawn a lot of fire – it couldn’t hurt to contact your elected officials and get your two-cents in.
Bottom line, the overwhelming majority of Americans agree that homeownership is a good thing. According to a 2010 survey by Bankrate.com, 90 percent of respondents said they had no regrets buying their current home. And a recent Fannie Mae survey found that most Americans — both those who currently own their homes and those who rent — aspire to own a home and to maintain homeownership.
Bargain prices, low rates, economic recovery, overall affordability – add it all up, then contact me to cash in on today’s red-hot housing market!
