Right Time to Buy?

Is it the right time to Purchase a home? According to the Home Opportunity Index(HOI) it may be the perfect time to buy a home for a few very important reasons. First off, in short the HOI is a quarterly report that weighs the median household income against the median housing cost in a given area. In the 1st Quarter of 2013 the HOI reached an average of 73.7% for over 200 metropolitan areas across the US. The highest HOI’s, not surprisingly, came from smaller markets and many were located in the Midwest in cities like Cincinnati,OH with an index just over 90%. Larger markets like NY & LA are still among the lowest in affordability ratios but with higher Jumbo loan limits in recent years in Conventional & FHA programs in “high cost” areas the ratio’s have relaxed a bit in those less than affordable areas.

The overall HOI indicates that nearly 3/4 of the population surveyed can afford housing in the their respective markets. Now, the HOI has actually been above 70% for 17 straight quarters but there’s a twist and I’ll explain it a bit later in this post. Since the economic woes of 2007 mortgage rates have fallen from the 7’s to the 3’s and housing prices have dropped dramatically as well. These two components are the main culprit in the rise of the HOI across the nation in recent years and will inevitably cause its downfall, back to normal levels anyway. Historically the HOI has been below 60% so we are well above that now which is allowing many more potential homeowners to engage the market. We are now seeing the economy improving with over 5 million jobs being added back into the equation and consumer confidence and spending is on the rise. So the twist, rates are on the rise along with housing prices. With continued economic improvement comes higher rates and a stabilizing housing market.

Year over year statistics show lower foreclosure rates and rising equity rates across the nation. Some areas are still in rough shape unfortunately, but the overall lesson is that affordability will decline so if you’re in the market to purchase a home in the short-term you may need to bump up your schedule a bit to get those really great deals still available. Lastly, “it’s a buyers market”, for more potential buyers than ever in fact but not for long so take advantage.