Yes, It Still Makes Sense to Buy a House

If you bought a house in the early 1980s, you likely can’t believe how low home loan rates are today. Federal Reserve records indicate the 30-year fixed rate was an astonishing 18.45% in October of 1981. Few borrowers took mortgages at that high rate, yet the average contract rate in November of 1981 was 15.8%. Those double-digit interest rates made home loans extremely expensive, and risky, 30 years ago.

The picture today is radically different, with home loan rates less than 5%—where they have been for many months. And, in another plus for house hunters, there are many houses for sale—meaning it is a buyer’s market.

The weak economy understandably leaves some prospective homeowners reluctant to make such a big financial commitment. Some analysts even have gone so far as to pooh-pooh the desirability of owning a home anymore. They suggest that, since houses are not appreciating as they were four or five years ago, the investment is no longer prudent.

That’s a short-sighted viewpoint. There still are many very sound reasons to buy a house:

  • Homes are affordable. Prices have come down about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Values have come down about 20% in some areas and as much as 50% in particularly hard-hit communities.

  • Home inventory is high. This means you can buy more house now than you could have at the peak of the housing market a few years ago. You have considerable leverage to negotiate the price of a house for sale.

  • Home loan rates are at historic lows. Again, this makes it possible to buy more house. Consider a home loan of $120,000. At a 5% annual percentage rate (APR) on a 30-year mortgage, your monthly payment is $644. The same loan at a 6.5% APR would come to $758 a month.

  • You still qualify for a tax break on interest payments. While this benefit alone is not a good reason to buy a house, it does sweeten the arrangement if you itemize deductions.

  • You’ll own it. You can design it, remodel it, and paint it any dang color you choose. You never have that freedom in a rental.

  • It’s forced savings. You’ll build equity, even if more slowly than in the past, in a house you own; rent money is just…well…gone.

The combo of low loan rates and low home prices is too good to pass up. If you’re ready to explore your housing options, talk to a HUECU loan officer. We’ll help you clear up the mixed messages about home owning and can even pre-qualify you for a mortgage. That way, you’ll know exactly what neighborhood to start shopping in.

For more information, stop by any of our branch locations, email us or call us at (617) 495-4460.


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