Making the case for buying a home
If the market is up then real estate is touted as a great investment. If it’s down, then we’re told to “buy low and sell high” and that real estate is, well, a great long-term investment. It seems the “perception is reality” crowd touts the idea that it is always a great time to buy or sell a home regardless what is happening in the market (we’ll leave the confusing notion that it’s always simultaneously a great time to buy or sell for another day).
Frankly, the best time to purchase a home is typically when you find you need one. It really is a simple as that. For the individual, then, the right time to buy a house can be brought on by a job change, growing family or a slew of other reasons. The fact of the matter is simply this – a home is significantly different than a stock, bond or any other security that falls into the “buy low, sell high” category.
Here’s what I mean. I bought my house almost five years ago for a price that was well below fair market value. How much is it worth now? I don’t know and I don’t care. That’s my home and I’ll only worry about its value should I decide it’s time to sell it and buy another one. Should that time come, then that will be the best time for me to buy a home. Simple, no?
That said there are some times when purchasing a home are better than others and we have entered into one of those times. Want proof? Here are a few facts to consider.
* Interest rates are low. According to the national Mortgage Bankers Association, the fixed interest rate on a 30-year mortgage was 5 percent and 4.28 percent on a 15-year mortgage on Feb. 18. There’s been a lot of talk about interest rates rising, but they are still very low compared to historic averages. However, those rates are bound to increase and the Mortgage Bankers Association has forecast rates climbing into the 6 percent range for a 30-year mortgage next year and rising slightly throughout 2011. In other words, grab those rates while you can – they won’t last forever.
* Home prices are low. The average sales price in central Arkansas in January was $178,794 – up slightly from $176,881 a year ago. The average price per square foot, however, was $74.89 in January – up just a bit from the same month last year but down from $75.59 in the same month in 2009. In other words, buyers can get larger houses for less money in central Arkansas than they could a couple of years ago. The math works out about the same in northwest Arkansas and other parts of the state.
* Sellers are very reasonable now. During the height of the housing market in 2005, it wasn’t uncommon to see sellers pulling in 105 percent or more of their asking prices when they sold their homes. A seller, then, might list a house for $200,000 and sell it for $210,000. In central Arkansas, sellers received an average of 93.98 percent of their list prices in January – in northwest Arkansas, that ratio was 93.81 percent and you’ll find similar stats in markets around Arkansas.
That little bit of information is good news for both buyers and sellers. Why? Sellers know there’s room for negotiation, while buyers understand that they will get close to their list prices when their homes sell. Sellers should, however, keep one thing in mind – they’ll get close to what they want for their homes if they price them well — expecting 10 percent higher than market value because your house is “special” is simply not realistic. A seller wanting $220,000 for that house that has a fair market value of $200,000 can expect to watch one buyer after another pass them by as home owners have become very aware of the pitfalls of asking for too much money for their houses.
In other words, people who have entertained the thought of purchasing a house might find that now is, indeed, a great time to buy.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.