Buying a House in Back on Track
With declining home prices and record low mortgage rates buying a house is making a comeback. With close to 60 million families which is almost half of all U.S. households, can now afford the median-priced new home of $200,000. This is based on the numbers that were recently released by the National Association of Home Builders (NAHB). According to those numbers it translates into an increase of almost 17 million households which is the best housing affordability number seen in years and thus home buyers are now beginning to come back to the housing market.
Data released from the U.S. Census Bureau collected between February 2007 and February 2009 which compared home prices, minimum income needed to buy a median-priced home, as well as mortgage rates, a typical family today can now buy a home with $20,000 less in household income and in turn can save almost $500 per month on principal, interest, insurance and taxes. It's been determined by the NAHB's data, that compared to over 38 million families just two years ago, that number has risen to close to 60 million families today.
Further encouraging signs that the housing market may be close to reaching the bottom is that there are many more potential buyers walking through new model homes particularly now that affordability is dramatically higher.
As we enter the spring home buying season, there are even more signs that new and first time home buyers are beginning to come back to the housing market.
First, permits for single-family homes went up by 11% in February 2009, and existing home sales have also posted gains while the inventory backlog is now slowly decreasing. Based on a recent survey taken by a major real estate firm, 78% of people asked reported that now is a great time to buy a home and a further 68% said that it's an even better time now than it was just six months ago.
Secondly, another great indicator is that many consumers are contemplating coming back to the housing market based on the growing interest in taking advantage of the $8,000 first-time home buyer tax credit recently enacted in an economic stimulus package which will expire at the end of November this year. Together with the $8000 tax credit, 30 year fixed rates below 5% and the abundant inventory still available to choose from, many potential buyers see this as a once in a lifetime opportunity to buy a house.
As we now know, the housing market is such an important part of our economy, which accounts for approximately 15 cents of each dollar spent in the United States, and with any positive change in the housing market it's always good news for the economy as a whole.
Moreover, with the construction of an additional 500,000 new single-family homes, which could create over 700,000 new jobs and bring in over $30 billion in wages to the construction industry, an additional 790,000 jobs may be created bringing in over $37 billion in wages for the trade, manufacturing, and service jobs sector.
With this increase in construction of new homes it would also generate over $40 billion in federal, state and local tax revenues. Taking it a step further, these new home owners could spend over $2 billion on appliances, furnishings and other property enhancing changes.