Home Prices: First Monthly Increase In Nearly Three Years

Saturday, August 1, 2009, AM | Leave Comment

A handful of early signs suggest construction starts and new house sales were up nicely in June. Prices rose from April to May, the first monthly increase in nearly three years. That raises a question. Has the bottom of the housing market reached and the price is on its way upward? Is this price-increase trend going to continue? If it is, then is it the right time to buy? But this question has frequently come to mind not in this recession but almost all the time.

I remember back in the early 1980s, if a house was selling for $100,000, folks would buy it because the perception at that time was that next year it would be selling for $120,000. So, many would buy it at the lower price. Those were crazy times. It was definitely a seller’s market.

This is different now. The perception that next year the price would be 10%, 20%, even 30% more – those days are gone. Now when you buy a house, my friend from the 60s suggest, buy it for good reasons, for your family, for changing to a better livelihood – hopefully -, for living in more space than an apartment – hopefully -, and not because the prices would be higher next year. This is definitely a buyer’s market.

If you can afford it and if you believe that the new data is correct and this is the right time, then by all means go ahead and prepare for your new livelihood.

House prices over long time periods should track inflation, which is, after all, a rise in the price of ordinary goods and in turn a drop in the value of money.

Having said that, house buyers perhaps don’t care about the historical relationship between houses and inflation. They care about whether they can afford their mortgage payments, and about whether buying is a better deal than renting.

In a Nutshell
You need to do some more research. Financial situation is right on the edge. Nobody knows about the future. However, do some calculations and see if you can afford to buy a house. Never go overboard. Never use the sub-prime rate debacle. Folks were unable to afford a house, some were at very high risk, but the mortgage debt was shoved down their throat anyway. Avoid that and always try to live within your means.

To help you, here are some freshly minted interest rates and some calculators that go with it.

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