This summer may be one of the last opportunities to buy a home at exceptionally low mortgage rates, but in what cases should you decide to remain a renter?
The decision is not as easy as it seemed some years ago when the prevailing advice was that buying a home almost always made sense.
Today, households are wisely weighing the pros and cons of home ownership more carefully—as is nicely considered in a recent New York Times article at this link.
Buying at an affordable price is the issue that I want to focus on—among a number of factors to consider.
The goal is simple, if you consider your home an investment. You should aim to buy at a low or reasonable price. And there should be a good likelihood that the price will rise over time and allow you to sell someday at a much higher price.
Finding an affordable price, however, depends greatly on your local market. That’s because the recovery in home prices since the 2008 financial crisis has varied widely by state and local market.
What this variation tells me is that:
- 15 states represent good places to look for affordable prices because average home prices remain well below pre-crisis highs;
- 20 states are places to be particularly careful about buying at elevated prices because average home prices have risen above pre-crisis highs;
See the table for the list of states.
Ultimately you will need to find out whether prices in the local city market are stronger or weaker than what’s happening statewide.
In California, for example, home prices remain below their pre-crisis highs on average, but that’s certainly not the case in local markets such as San Francisco. There, home prices have moved higher much more rapidly because of a strong market for technology workers.
Of course, there are other factors to consider in the home buying decision.
One generally accepted condition is that buying makes financial sense only when the buyers plan to stay in the home for at least five years.
Whatever the factors important to your case, consider them now. Current low mortgage rates represent a window of opportunity that will close perhaps sooner rather than later. For more on the mortgage rate trends, see this prior article.
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