Did you hear the bad news/good news?
Case Shiller reported that of the 20 cities it recorded, home prices are off to a dismal start with 18 cities down in price. Only one city had a 3.6 percent increase in prices. Guess which city that was: You got it — D.C. area.
So with all the negative press these days about housing being in the dumps and prices poised to drop further, it’s important to recognize that these are national numbers, not local. Why is Washington, D.C., faring better than the national average? The answer is the city’s low unemployment rate, which stands at about 5.6 percent, high affordability, above average home price growth, falling foreclosure rate, fewer houses under distressed sale, cheaper to buy than rent and an increasing population.
All of these factors bode well for the future of housing in the Washington region. This is why we are seeing multiple offers this spring with low inventory levels. Realtors’ biggest complaint is that there is not enough inventory to sell, which is starting to drive up prices. If you do not want to listen to me then ask your local Realtor and they will tell you the same.
So now you ask yourself, “Why should I pull the trigger today?” Well here are the reasons why now is a good time to jump off the sidelines and get into the housing market:
• You can still find a good price if you look hard. The MRIS (multiple regional listing service) and Delta Associates are estimating that the increasing number of jobs in the area will continue the price gains long term. Buying now makes sense as statistics show prices are on the upswing.
• Mortgage rates are still low but not for long as the economy shows continued signs of improvement. Today you can get a loan at about 4.75 percent, where just two and a half years ago, rates were at 6.25 percent. Over a 30-year period that can save you many thousands of dollars.
• You will save on income taxes to be able to afford more per month. You can deduct the mortgage interest and real estate taxes off your net taxable income.
• You will be able to hedge against inflation in the long term. No, you are not guaranteed a quick return in two years but history has shown that owning a home over an extended period of time does beat inflation by a couple of points a year over average.
• It’s forced savings. As you continue to make your mortgage payment monthly, more dollars go into principal to pay the loan down, which builds up equity. On top of that savings you have the appreciation of the property over the long term. Like the stock market it is risk capital. As the stock market continues to go up and the economy improves the price will start to appreciate again. Just look at history!
As the population continues to grow in our country and here in the Washington area, if new housing is not being created, then the strain is going to be felt in the prices of homes. New building permits are only growing at 4 percent and while this is sufficient to cover population growth, it won’t be enough to cover those moving to the market or those transitioning from renting to buying. So don’t pay attention to the negative headlines about housing and act now.