Home Prices – Interest Rates – Affordability

As a real estate professional, I spend a lot of time studying home market trends and listening to industry analysts. Although I may not agree with much of what I read, mostly due to general national data versus local market data, I like to share market outlooks from time to time and give credit to their source. Here is one I came across last week from Bill Gross, Managing Director of PIMCO, in his April 2007 Investment Outlook newsletter:

“ . . . if home prices in the U.S. have peaked, and are expected to stay below that peak on a real price basis for the next three years, then the Fed will cut rates and cut them significantly over the next few years in order to revigorate an anemic U.S. economy.”

On the surface, it looks like a prediction of lower home loan rates over the next few years – even lower than the existing historically low rates. Or . . . does it indicate that rates will remain the same and that home prices will decline. Or . . . well, you might see some lack of strong outlook that you can hang your hat on here. No matter what direction the housing sector might turn, the statement works. The bottom line is this – first time homebuyers should not be shy about jumping into the housing market. Interest rates are low. Available home inventory is high. And regardless of the future, near or long term, the tax benefits of home ownership in America are unparalleled in the world.

Oh – and I certainly do not want to overlook the move-up homeowners. Even though the sale price of the home you are currently in might be depressed, so is the price of the home you will be buying. The net difference between the two will be relatively the same even if the market starts to recover. As such, now is very likely as good a time as any to make your move - your choices for a next home are aplenty.

All for now. Hope all is well in your world.