Is Now The Time To Buy A Home?

It’s great to be a homebuyer right now. Interest rates are at historic lows, Fannie Mae and Freddie Mac continue to offer home buyer incentives, and home values are deeply discounted from their 2006 highs. As foreclosures rates rise and as short sales increase as a percentage of total sales, home prices continue to fall.

For renters the big question is “is now the time to buy or do we wait even longer for a better deal?” Buying a home is certainly a big decision and many renters hesitate to leave the freedom and flexibility of renting.

In my experience as a Boise real estate agent, I have found that most prospective home buyers make their purchase decision primarily based on monthly payment . However, when buying real estate or purchasing a new home, there are several factors to consider beyond just the monthly payments including: tax consequences, home value appreciation / depreciation, and lifestyle issues.

Not surprisingly, many renters are choosing not to buy a home-simply because monthly rent payments are a few hundred dollars less than a mortgage payment on the same Boise home. I spend a lot of time helping clients develop personal budget plans, so I applaud anyone’s efforts to save money each month. However, the annual costs and benefits of owning a home rather than renting typically make it more expensive to rent than to buy a home.

Consider this simple rule of thumb: If the home price is 15 times higher than the annual rent for a similar property, it is better to rent. Otherwise, you are going to be better off financially by purchasing the home.

Let’s use an example of a typical Boise home (as of October 2010): 1. Assumption (Boise home with 3 bed / 2 bath, 1300 square feet, 5 to 10 years old, subdivision lot) 2. Monthly rent payments are $800 to $1000. Using $900, the annual rent is $10,800. 3. Boise’s MLS (multiple listing service) shows a typical boise home for sale is listed for $115,000 to $135,000. (Foreclosures and short sales usually represent the least expensive homes for sale.) 4. $10,800 X 15 = $162,000. 5. Conclusion: Home prices under $162,000 represent a good purchase opportunity.

Further analysis: A 1300 square foot home for $162,000 would be $124 per square foot. Typical Boise home sales are regularly going for $80 to $110 per square foot-with many deals even lower than that.

Bottom Line: Although Treasure Valley real estate prices may drop even further, now represents a great time to buy. According to the annual rent comparison, homes are very undervalued right now. (At the height of the real estate bubble in 2006, homes were selling for higher than $140 per square foot.)

Author Todd McCauley owns and manages a program called The HELP Program-Where we help our customers buy, sell or rent to own. We also HELP investors.. Blog http://thehelpprogram.com/?p=1108208-938-4032‎ located at 208 S Academy Ave # 170, Eagle, ID‎