January 4, 2011
By: Jim Oosterman, Vice President
Buying a home is perhaps one of the most significant investments any of us will make in our lifetime. Despite the current state of the economy and housing market, 8 in 10 people believe buying a home is a good financial decision. With benefits including historically low rates and tax breaks, why not take advantage? Below are some reasons why you might consider making the move into a (new) place of your own.
Banks are eager to lend to qualified buyers and mortgage rates are at historic lows. Right now, you can get a 30 year mortgage at an interest rate under 5.0%, down 2.0% from just two years ago (Wall Street Journal). According to Lawrence Yun, Chief Economist of the National Association of Realtors, once the housing market and rates rebound many people will look back to 2010 and say "I should have bought a home back then."
Tax breaks and equity
When you own a home, as opposed to renting, there is a potential for a return on your investment. With each mortgage payment you are building equity. Furthermore, you can deduct mortgage interest and real estate taxes from your federal income taxes. You should consult your tax advisor for advice specific to your financial situation and how buying a home could affect you.
It's a buyers market
In today's market, buyers don't need to buy a house as much as sellers need to sell. If you are a savvy negotiator, there is a good chance you will get a deal on a home. The supply of available homes is high so prices have come down in many area communities. Across the nation, the National Association of Realtors reports housing inventory has increased to 3.8 million in the third quarter of 2010. According to Standard and Poor’s Case-Shiller Index, housing prices have come down 30% from their peak. In Melrose, with 177 homes currently for sale with a median list price of $355,000, there is a lot to choose from.
Fulfill the American Dream
Americans aspire to owning their own house and the yard with the white picket fence. One of the greatest benefits of homeownership is exactly that, it's yours. In fact, the majority of renters say that owning a home at some point in the future is a high or moderate priority. They have good reason; historically a home owner’s net worth has ranged from 31 to 46 times greater than that of a renter. Additionally, a fixed-rate mortgage has stable payments for 15 – 30 years, whereas rent costs typically increase about 3% per year.
Aside from financial benefits, there are many social and emotional benefits of owning a home. According to the National Association of Realtors, studies show home owners are happier, healthier and feel more in control of their lives. They have higher participation rates in local volunteer and political organizations, and are more likely to vote. Research proves that home owners have more extensive social networks than renters; two-thirds of all U.S. households who own their home benefit from improved performance of children, lower crime rates and lower welfare dependency.
While there are many benefits to home ownership, it is not an endeavor to be taken lightly. There are expenses that you must consider and be prepared to handle. If owning a home is something that you can financially afford, there is no better time to take advantage than now, before the market rebounds.
Your local community bank, and your local realtor, are great resources to learn more about homeownership and obtaining a mortgage, and many offer free informative seminars for prospective home buyers.