With all the talk of the housing market recovery, you may still be a little gun shy about buying a home. And with good reason. It’s hard to shake off the memory of plummeting home values and foreclosures that shook the foundation of the American dream not so long ago. But here we are in June, 2013 and, if nothing else, all the Wall Street optimism may have you wondering if it’s time to test the waters. But before you dive in, let’s do a little safety check and look at a few facts:
1. Home prices are moving upward, but still well below their highs prior to the 2008 recession. According to the Case-Shiller Home Price Index , home prices in the Boston metropolitan area are currently down 15% from their peak in September 2005. BUT, according to the same index, you already missed the bottom in March 2012, and home prices are up 6.7% from that time.
2. Because housing prices are cyclical, buying at a low point can still be rewarding. If recent history doesn’t convince you that housing prices are cyclical, let’s go back to the previous housing bubble in the early 1990’s. According to the Case-Shiller Index for the Boston market, if you bought at the bottom in 1992, your home is now worth 150% more now than it did back then. That’s not a bad return. And it even takes into account the recent housing bubble.
3. The cost of renting is increasing faster than inflation. If you’re thinking about buying a home, chances are you’re renting. And if you’re renting in the Boston area, rents jumped 3.4% from March 2012 to March 2013, according to the Local Market Monitor. So what does that mean for you?
- First, a new rental lease will cost you 3.4% more than a year ago. On the other hand, if you purchased a home last year, its value would be, on average, 6.7% higher.
- Second, according to the Bureau of Labor Statistics , the Consumer Price Index (a measure of inflation) increased 1.9% from March 2012 to March 2013. That means renters like you are paying more for housing relative to inflation while homebuyers earned more than the rate of inflation.
- And finally, the Local Market Monitor is forecasting that Boston rents will increase 18% over the next three years.
Still wondering if it’s a good time to buy? You should be. After all, buying a home is huge investment, one that shouldn’t be taken lightly. So do your homework and consider all the facts before buying. And if you decide to take the plunge, financing options are now available at Webster Bank. So what do you think? Is now the right time to buy a home?
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