Maricopa Chamber Finance Blog

Oct 15

Is buying a Home a Good Idea in Today’s Economy?

Filed Under Uncategorized

Last modified: October 15, 2007

Guest Writer: Don Reitz, Dan Schwartz Realty

As a long term investment, homeownership is still one of the best investments an individual can make. Headlines and other media say that the housing market is down and out, with defaults rising at an alarming rate, and mortgage markets so frozen that buyers can’t get a home loan at any price.

The fact is, there is no “credit crunch” for qualified buyers taking out a loan of under $417,000. Loans up to that amount are backed by government sponsored companies like Fannie Mae or Freddie MAC. There are a lot of new-home builders that offer a great selection of homes below that price. The sub-prime mortgage turmoil we hear about is only about 13 percent of the $10.4 trillion outstanding loans today.

If you have a good credit, a job and a steady income, you will find that there is plenty of mortgage credit to be had at good rates. For well qualified buyers, rates are running about 6.5 percent, which is fantastic on a historic basis. In 1984, fixed rate mortgage interest was as high as 14.75 percent. Even as recently as 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.. When rates are this attractive, it just makes sense to buy. Another thing to keep in mind is that there are a lot of homes for sale – more than there have been in a long time. That means you have a great selection from which to choose and should have no problem finding exactly what you’re looking for and, you’re in a very good position to negotiate a good deal.

What buyers need to realize is housing markets inevitably have their ups and downs and homeownership has a track record that virtually is unmatched by any other purchase in terms of real benefits. The long-term fundamentals for housing remain the same. To make the argument that prices will keep going down, you have to believe that the cost of building a home is going to go down. That won’t happen. Land, material, and labor costs only will keep getting higher. So the price of new homes will increase overall and the price of existing homes, due to market competitiveness, will go up as well. First and foremost a house should be a place in which to live and raise your family. Too many people recently got carried away with the idea of making a quick buck by purchasing a home or condo and reselling it right away for a profit. Those days are gone.

The bottom line is this: If you are looking for a place to live and for a solid long-term investment, now is a good time to by a home.

Don Rietz, Dan Schwartz Realty, Inc
Email: DonAZland@Qwest.net