Should You Buy A House This Year – Midweek Infographic

In 2008, The Case-Shiller home price index reported the largest price drop in its history due to a combination of foreclosures, subprime mortgages, housing speculation, CDOs and a dozen other factors. Whether you were a home owner then, since then or you’re still renting, the diminishing housing prices have affected you in some way.

The population is continuously increasing and people still need homes, regardless of what the prices are doing. It’s become more important than ever to look at all of the factors contributing to the cost of a home and what that home may be worth in the future. Today’s infographic will help answer the question, should you buy a house in 2012 or should you continue to rent?

infographic buy or rent a house in 2012

My favorite part of the infographic is the second section, which discusses the price to rent ratio. This is an extremely useful calculation that you can benefit from in any housing environment. Personally, I use this ratio when deciding on whether or not to purchase a property that I plan on renting out.  If the price of the house is too high relative to the monthly rent you could collect, it doesn’t make sense to buy the property. The same scenario exists if you are buying with the intention of living in the home – rent until it is financially wise to buy.

The infographic concludes that 2012 is a great time to buy a home. Of course that depends on the area in which you live. Some cities and states have seen price stabilization and even slight increases while others are still decreasing.  Another positive factor to consider is the incredibly low borrowing rates. The infographic states that interest rates reached an all time low in 2011, but that low was actually broken today, July 5th. Since the 30-year mortgage has existed, it has never been this minuscule – 3.62%. In my opinion, we will never see prices this low combined with an opportunity to borrow at unbelievable rates.

READERS:  Is anyone thinking about buying vs. renting this year or in the near future?  What are you thoughts so far and why?

 


About JW

Trader for 14 years. Series 7 & 63 licensed. Masters in Financial Management. Teacher of 100+ hours of financial education classes.

Comments

  1. I hate renting and want to buy ASAP but I don’t have a permanent job. The boyfriend is a business owner and banks don’t love to lend to business owners. So, we’ll have to wait for now

    • You’re absolutely right about that Daisy – banks don’t like lending unless you have a long history of earnings. Have you looked into FHA loans? They are generally easier to get and the rates are pretty competitive. You just have to find a property that’s FHA approved.

      I don’t see rates and prices making a substantial move for a couple of years though, so you still have plenty of time to take advantage of these conditions.

  2. We bought our current home in Dec ’03 and I’m so glad we did! We were actually going to wait to buy a house, but I became pregnant with our second child much sooner than expected and only had a 2-bedroom before that. Our second child was thus a godsend in more ways that one! We have neighbors across the street whose house isn’t any bigger than ours and they spent a LOT more on theirs just because they purchased 2 years after we had. I’d love to take advantage of these great prices on homes today, but that also means I’d have to get someone to buy my current house which needs a little work.

    • That’s one of those smart choices that you’re not aware of until after the fact. Millions of people that bought homes between 2005 – 08 wish they could go back and alter their decision. That’s why you see so many people walking away from underwater homes. They figure, “why pay the bank $2500 a month for a home that has lost 40% of it’s value?”.

  3. Really? San Jose is a buyer market? I heard people are bidding again and price is going up.

    • Joe, I think the primary driving factor is the number of foreclosures in an area. A foreclosure will quickly bring down the price of sorrounding homes, while the lack of foreclosures will allow prices to stabilize at more accurate values. Because banks continuously release new foreclosures into the housing market, areas like southern California, Nevada and Arizona will seem to drastically fluctuate each month.

  4. Helpful infographic. That’s a huge shift. In real dollars, I wonder how much rent has change. It is clear that the typical house is MUCH lowered. I think the comment you made about foreclosures driving down the prices is right on the money. It’s sad but true.

    • The good thing about foreclosures being responsible for the volatile housing market is that once the inventory returns to normal levels, housing should stabilize somewhat. At least we have something measurable to watch.

      I have rental properties and I’ve found that rents increased 8% on average from 2011 to 2012 in my area. I used this data to justify raising rent 5% on one property.

  5. I have been thinking about buying, but unfortunately I live in one of the areas that is a renter’s market. House prices didn’t really drop at all where I live when the housing market crashed. Sad for a hopeful-home-buyer like me. ; Guess it’s time to move… haha

    • I would love to be a homeowner where you live Corey. I don’t expect rates to move too much in the next 2 – 3 years, so you may still have a good opportunity if you can find a foreclosure or short sell.

  6. I love it! I will re-blog this! It’s so easy to understand!

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