If you have been aspiring to own a home but have been holding back, now or at least by 2013 is the time to make the jump. Home prices and values are rising and constructors are starting to build again. Time that passes by because you are undecided is time during which the price of the home you want is going up. There are 5 reasons why you should be making your move now or in the very near future. Let's explore why you may want to become a 2013 first time home buyer.
1) Buying costs less the renting right now
Since the recession hit and deepened, home values and prices fell lower and lower. So much so that when the housing market hit rock bottom, it became cheaper to rent than to buy. If there was a difference, it was very small. The gap widened and it became cheaper to buy when foreclosures were at an all time lower forcing those who had lost their homes to rent. With increased demand for rental property, rents went up.
Mortgage interest rates went down drastically with such low demand. The rates are still the lowest they have ever been in the last 50 years. Home values and prices are going up but at the moment, they favor the buyers. Add in the tax benefits and this is definitely the time to buy that first home. Read The Rent vs Buy Debate and Real Numbers for a closer look.
2) Mortgage interest deduction is likely to remain
Things are up are in the air in the US at the moment in view of the November General Elections. Different parties and presidential candidates have different ideas about reduced mortgage interest rates. The tax benefit costs the government between $80 billion and $100 billion every year. This is money that could instead be channeled towards reducing overall taxes. Republican party presidential candidate Governor Romney has talked about reducing the current tax benefit of owning a home but nothing specific has been said about how much of a reduction would be made.
However, the broad opinion of players in the housing market is that interest rates deduction is one of the factors that has been instrumental in holding the market together over the worst of times and reviving it. The most that can be done is to limit the amount that can be deducted but the reduction is not likely to be significant enough to affect home buyers in the middle class. It looks like a great time to become a 2013 first time home buyer.
3) Home prices are very low but they have hit rock bottom
Home prices all over the country are down by over 30% of what they were when they were at their peak in 2007. They have fallen by even lower margins in the worst hit cities like Miami, Las Vegas and Phoenix where prices have fallen by up to 45%. Another important factor to note is that even though the recession has ended, price recovery is still very slow. What can be said for sure is to those waiting for home prices to fall further is that they will not be falling any lower. Read Housing Market 2012 Latest: Home Prices Increasing for a deeper look at the current market.
4) Home prices will go up as the economy recovers
US has previously gone into recession between 1973 and 1975 and again between 1981 and 1982. When the economy recovered, home prices shot up by approximately 20% within a period of 7 years. This was the margin rise in real terms without factoring in how much prices went up because of inflation.
In the latest recession, home prices went down four times as much as they did in the previous recessions. One aftermath of this is that economic recovery is slower but when the rebound does come, it could also be a much larger one. This means that home prices could go up by more than 20% and price increases from inflation would also be higher.
5) It seems likely that there will be significantly high inflation in the future
From 2008, the policies of the Federal Government that have been made to instigate economic recovery have increased basic money supply by more than three times. Basic supply includes currency but not checking and savings accounts funds. What this means is that it is possible that the American dollar could lose up to three times its value.
That may not be accurate and the effects will not be felt until people and corporations start spending freely once more. When this happens though, the recent increases in outstanding sums of money could start to cause high inflation. The Federal Government will need to mop up what they have put in over the first three years which would be difficult to do quickly.
If you are still sitting on the fence about buying your first home in 2013, you could miss out on a fence of your own when what is now guided speculation like higher price homes and higher inflation become reality. Getting in touch with your lender now would be a prudent move.