Is It A Good Time To Buy A House?

The area I’m leaving has a booming real estate market. For renting, not for buying. A dozen people have come to see the house I’m currently leasing, and last I heard, there were three contracts on it from people who were desperately trying to rent it. And that’s for $200 more per month than what I’m paying right now.

The area to which I’m moving has a booming real estate market as well. For renting, not for buying. You see a house you’d like to lease? You’d better get on it quick. If not, the next thing you know, somebody else is moving their belongings into it while you continue to scour the classifieds looking for the next deal.

Even though the market to where I’m moving is thriving and adding population at a ridiculously high rate, the real estate market for buyers continues to be stagnant. Not dropping, like much of the rest of the country these days. It’s doing well enough. But nothing like the lease market.

Why is that? And more importantly, are we missing something by deciding to rent instead of buy? Or are we just scared of signing onto a six-figure-sized debt in an economy that continues to frighten us on a daily basis.

Yes, people are scared. And yes, people are having a tough time qualifying for loans. That combination tells the story of why people, despite historically low interest rests, just aren’t ready to buy.

“People can’t qualify to purchase,” said Sam McCormick, a real estate agent with Harry Norman Realtors in Atlanta. “The requirements that Fannie Mae, Freddie Mac and the federal government have put on are as tight as you’ll ever see. I hate to say it—we’re losing purchasers for that reason. They’ve tightened to the point where it’s working against us. All these years, the government has been saying we want home ownership, everybody from Bush to Obama. But they’re doing everything to deter it for past sins.”

We are, of course, living in a different reality. We’ve always been told that investing in real assets and real estate is the way to go, because eventually, you will make money. Whether it’s 10 years or 30 years later, you will make a profit on your house. That’s been the line for decades and decades.

But is that still true today? After the real estate bubble collapsed so spectacularly in the latter part of the last decade, can we be sure the market will ever rebound to where it was before? I’m no expert, but my resources say it probably will. But we can’t be certain, and that’s a scary proposition.

It’s because we were all living in a fantasy world in the middle of the last decade when the real estate market took off like a rocket. (Five-year ARM loans! No down payment required! Interest-only loans!) And so many of us crowded inside for that trip to the moon. Then, the explosion and the fall back to earth that has left the debris of foreclosures, short sales and ruined credit in its wake.

Who do we blame? The government for a lack of oversight? The banks who chopped up those bad mortgages and sold them off for even bigger money? Ourselves?

The answer is, of course, everybody. It was the wild, wild west in the mortgage market.

“We were order-takers, that’s all,” McCormick said. “We didn’t have to qualify for anybody. They loaned more money out than I have ever seen in my life. It drove the market artificially in appreciation, boosting it way too hard. The first thing the banks said was, ‘We’ll loan you money to pay your current bills off and we can use the equity in your home.’ What they did was help you leverage yourself upside down.”

It was bad business, and we’re paying for it now by renting and not buying.

But it’s easy to look back and tsk-tsk everybody for the mess we’re in today. The real question is whether buying a house is a good investment (if you can afford it) right now while it’s still such a buyer’s market? The answer: of course.

The mortgage interest dropped recently to its lowest interest rates in more than a half-century. As the UPI recounts, the average interest rates for a 15-year fixed-rate loan fell from 3.5 to 3.36 percent, and the rates for a 30-year fixed-rate loan dropped from 4.32 to 4.15 percent. Which is a pretty incredible deal.

“That,” McCormick said, “is unprecedented in my 33 years in real estate.”

People still aren’t buying, though. Oh, they did when the federal government gave a tax credit to first-time home-buyers, but even then, McCormick points out, the rise in home-buying didn’t increase as much as experts expected. And now that the tax credit is gone, potential home-buyers are leasing instead. By the end of August this year, McCormick had completed almost as many leases as all of last year.

He doesn’t see the lease market slowing down anytime soon. But the good news: the buyers market will continue. According to Zillow.com last February, “We believe it will still be some time (possibly three to five years) before home values begin appreciating at normal levels of between 2 percent and 4 percent annually. In the interim, we’ll see home values stay fairly flat.”

Said McCormick: “It’s going to be a very slow market in the sense that people are too scared to buy. Big time. It’s easier and cheaper to rent than it is to buy.”

That doesn’t make it the right move. If you can afford it, buy the house. Buy it while the interest rates are so low. Buy it when you have so much leverage against a seller. Do the 30-year fixed loan for 4 percent. Invest in a house—and yourself. Otherwise, you’re throwing your money away, and it’s going directly into your landlord’s pocket.