D.J. June 12/01/2006 Vice-President, Premier communities, Inc. with support from the NAHB Resource Library
Just as it helped to feed the frenzy surrounding housing when the market was performing at record highs, the media generally are now overstating the dimensions and effects of the current contraction. The truth is that the record production and sales recorded in 2004-2005 were unsustainable. The current downswing is an inevitable mid-cycle correction from unsustainable levels of home sales, housing production and house price appreciation to levels that are supported by underlying market fundamentals. As long as the economy remains in good shape, interest rates remain close to current levels, energy prices remain below recent highs and sellers of new and existing homes adjust prices or offer incentives to fit current market realities, the rest of the housing market correction should be of limited depth and duration. It’s likely that the bulk of the downswing in home sales and housing production will occur this year, with market activity stabilizing around mid-2007 and moving back up toward trend by late 2008. This is good news for housing consumers who can take advantage of prices down from peak levels, still very affordable mortgage interest rates and other sales incentives. This is truly a great time to buy a home. Today’s housing market is a different animal completely from the one we saw just a few years back. But with change often comes opportunity, and there’s no exception in this case either. Market economics are creating an excellent environment in which to buy a home. Consider the following advantages for home shoppers today:Prices have leveled off. In some areas, prices have even declined. Regions that were burning hot in the past have begun to cool and level off, giving the buyer a unique opportunity to find affordable housing that may have been out of reach before. Most likely, you can get the house of your dreams and still have a budget leftover for decorating. Houses are staying on the market longer, meaning more choices for you. Previously, home shoppers had to make an offer immediately if they wanted to get their top choice. Today, there are a wide variety of homes for sale, with a better chance of getting the home that fits your needs, without the super-stiff competition from lots of other buyers as was seen in years past.Mortgage rates are historically low. Interest rates are still affordable and according to
http://www.bankrate.com/, 30 year fixed mortgage rates are currently remaining near 5.75 percent. Looking back, 1984 saw fixed rate mortgage interests as high as 14.75 percent. Even just six years ago, interest rates ranged from 8 to 8.5 percent. A half-percent rate difference on a $200,000 mortgage, from 6.5 percent to 7 percent, translates into an increase in monthly mortgage payments of $66.00. Over a thirty-year mortgage, that’s an extra $23,926! When rates are this attractive, it just doesn’t make sense to try and time the market. For most Americans, there's no better way to build net worth than home ownership. Home equity, the value of a home minus any mortgage debt, accounts for more than half of the total net wealth of the typical family, making homeownership the primary source of a household's net worth. This makes owning a home the fundamental first step toward accumulating personal wealth. And don’t forget the great tax benefits as well!Homeownership is always attractive. Besides being a stepping stone to a future of financial security, homeownership provides a sense of community and personal satisfaction and inspires civic responsibility. Homeowners are more likely to vote and get involved in local issues. Studies show they are also more content with their lives, owing to the spillover benefits from an increased social circle, a stronger sense of belonging and increased activity in community groups. Homeownership is the cornerstone of the American way of life and the fulfillment of the American Dream. Today’s market allows that dream to be possible for you as well.For more information about homeownership or today’s housing opportunities, visit
www.nahb.org/forconsumers. To sign up for NAHB’s free consumer e-newsletter, visit
www.nahb.org/housekeys.
