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Should I Buy a House?

This is a great question that, if you’re renting, you may ask yourself every month as you write a check to pay someone else’s mortgage instead of yours.
According to an article published on Bloomberg this week, the lack of confidence in the housing market is preventing people from buying a home. “The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said finance professor at San Diego University, Michael Lea.

Historically, homes have been seen as a safer investment than securities. Falling prices have made home buying more affordable than ever. Housing prices haven’t been this low since 1970. Mortgage interest rates are also at record lows; the last time interest rates were this low was back in 1972. Then why are people are afraid of buying?

Reasons Why People Are Choosing Renting vs. Buying – Data Shows That Housing is Not a Risk-Free Investment

Data from the National Association of Realtors show that the median U.S. home prices tumbled 32% from a 2006 peak to a nine-year low back in February. Also, by the end of 2010, about 11 million U.S. homes were underwater, according to CoreLogic Inc., a California-based real estate information company.

The housing market crash has taught us that we can’t see a home as a short-term investment. The days of flipping homes for a profit are gone. Homebuyers now have to buy a house with a different mindset – a house is a home first, investment second.

Housing Market Recovery

In an April 14 report by the Mortgage Banker’s Association, data shows that home sales will most likely rise 4.1% to 5.1 million in 2011. In 2012, sales may climb 5.9 % to 5.4 million, the highest pace since 2007.
Also, as the job market improves, purchase activity will continue to increase. All these signs of recovery eventually lead to higher interest rates. By the fourth quarter of 2012, the average fixed rate may rise to 6%, according to the Mortgage Banker’s Association.

“There are going to be a lot of people kicking themselves a few years from now because they didn’t take advantage of the low prices and the low mortgage rates,” said Robert Stein, a senior economist at First Trust Portfolios and former head of Treasury Department’s Office of Economic Policy.

If you decide that buying a home is for you, there has never been a better time to do so. Not only you get low mortgage interest rates but you also get affordable prices. Purchasing a house now may be one of the wisest decisions you ever make.

Please read the whole article here.

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