On Monday, we gave you the links to four different articles that came to the same conclusion: it’s time to buy a home.
Today, we want to take a closer look at one of the sources, the JP Morgan’s Market Insights report.
Right from the beginning, the paper identifies the greatest challenge in today’s housing market: consumer emotion. They attempt to overcome that emotion with logical reasons why now is the time to buy a home.
They break it down to the following:
One measure of housing values is the ratio of personal income to home prices. The report explains where we are today:
“Since 1966, the median price of an existing single family home in the U.S. has varied between 150% and 251% of personal income per household. However, roughly three-quarters of the time it has been in a relatively narrow band between 185% and 230%. In September 2011, the ratio was just 153%, implying that to get back to an average price to income ratio, home prices would have to rise by about 27%.”
Current Mortgage Interest Rates
With current 30 year mortgage rates, housing payments are at historic lows as compared to personal income.
“During the week of October 7, Freddie Mac reported that mortgage rates had fallen to an average annual level of 3.94%. Assuming the use of a fixed rate mortgage with 20% down, this would make the median mortgage payment on a single family existing home just 6.9% of per household personal income, compared with an average of 14.4% since 1966.”
Monthly Rent vs. Monthly Mortgage Payment
Is it less expensive to own a home or rent a home? The answer to this question helps families make the decision whether or not to buy a home. The report explains:
“By the third quarter of this year, we estimate that the implied median mortgage payment had fallen to just 78% of the median asking rent…”
The paper comes to the conclusion that now is the time to buy.
“The numbers on housing have an important message for American families today, and particularly younger families setting out on life’s great adventure: Five years ago, at the peak of the home-buying euphoria, it was emphatically a time to rent. Today, when home ownership is depreciated more than ever before, the numbers tell us it is a time to buy.”
— Reposted with permissions of Keeping Current Matters
About The Staten Island Board of REALTORS® (SIBOR)
The Staten Island Board of REALTORS® (SIBOR) is the largest not-for-profit trade association in Staten Island, N.Y.
SIBOR exists to enhance the ability and opportunity of its members to conduct their business successfully and ethically; and to promote the preservation of the public’s right to own, transfer and use real property.
Comprised of over 1,800 members, SIBOR serves real estate agents, brokers and affiliated professionals throughout the borough and surrounding areas.
SIBOR is the provider of the Staten Island Multiple Listing Service (SIMLS), which works as a clearinghouse through which more than 250 local real estate firms exchange information on properties they have listed for sale. Together, its members participate in over 3,000 real estate transactions every year.
All SIBOR members belong to the New York State Association of REALTORS® (NYSAR) and the National Association of REALTORS® (NAR).
SIBOR may be reached at 718-928-3220 and visited online at http://siborrealtors.com/.