Time to Buy That House

Submitted by theStockMasters... on Mon, 10/17/2011 - 17:54

Tags:

Housing, Mortgages & Money

1-2-shaba-doo!! Highlander Jaws Bad Style If you haven't done it yet, its time. Record low rates, record low prices -- come on.

America's ratio of house prices to yearly rents is nearly restored to its prebubble average.

Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Buying a house right now get's the 1-2-shaba-doo.

theStockMasters.com - Our Rates are Hella Cheap

Think we suck, fine. Thus listen to the cats at the WSJ -- [UPSIDE] U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.

The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.

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