If I make a list of the top 5 questions I get asked whenever I bring up the topic of real estate in a conversation, “is this a good time to buy?” has to be second right below “how’s the market?”.

For that reason, I decided to do a little research on statistical data leading to the right answer to that question. The number reason a person should decide to buy a home should be when they are mentally and emotionally ready. The investment portion of buying a home should be second to your personal reasons. Now, that you’ve taken the steps to get mentally and financially prepared,  I like to point out the graph below which represents the affordability of buying a home…and I was pleasantly surprised to have found such results.

Between the early part of the 1970′s and 80′s, the affordability of buying a home dropped quite drastically. This was found to be interest rate driven. Towards the mid 80′s we see that affordability of owning  a home began turning and it got a little better. This is when FHA jumped back in the picture and started offering more flexible loan guidelines and rates also began dropping as well; this enticed people to start buying again.

In the 90′s the index bounced up and down, but remained steady until the famous BOOM which started in 2003. This boom lasted until 2007 and was ended by another boom of it’s own. The Boom ended itself! Owning a house got to expensive which is shown by the affordability index dropping from 125 to 100 (shown on the graph). Some people blame it on the adjustable programs other people have other reasons, but ultimately it was caused by lower affordability.

When I remember back when we were right around the end of the boom, right around 2005/2006. I had a friend in his mid 40′s and he has gone through this type of cycle before. Remember that real estate performs in cycles of approximately 7 years. Well, when everybody else was buying everything they could get their hands on my friend ended up selling his house and began renting. We couldn’t fathom what was going through his head knowing that property was appreciating so fast and there was a fortune to be made. Well, he was the smart one because the bottom of the market ended up falling out and everybody who had property that was purchased within that time got “caught” with their hands in the cookie jar. He rented a house till about late 2009 and as you can see in the graph the affordability index when up to about 170, that is when he decided to buy again. This seems to be within the bottom of the housing market which fundamentals tell us, when you buy low and sell high, YOU PROFIT!

Look closely at the chart for a second………… What did you notice? It has never been more affordable to own a home. The reason for this spike is due to home prices dropping and the recent reduction of interest rates. There was a time when interest rates reached a 50 year low, I mean interest rates for a 30 year fixed mortage are right around 4%.

So, for all those people who have asked me the question of “is this a good time to buy?”, I’m confident to say “YES!”. With so many good deals out there, low interest rates, and in contradiction of what the media is saying… flexible loan guidelines and the willingness of banks to lend I think it’s a great time to buy if you are emotionally and financially ready. The fact that mortgage payments are now lower or the same as a rent payment should be a good indication that buying a home is more beneficial. Contact me for a personalized rent vs own analysis that will help you understand if you should own a home or rent one.

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