Time To Buy A House

The signs have been there: record-low interest rates and reasonably priced homes. This week, the Wall Street Journal presents two factors that make now “an excellent time to buy a house.” First, the ratio of home prices to yearly rents is close to its pre-bubble average. Second, when mortgage rates are considered, houses are the most affordable they have been in decades.

The article goes on to explain that whether or not buying is a better deal than renting depends on the relationship between prices and rents, the cost of financing and other factors. The good news is that the numbers all seem to be heading in the right direction.

According to Moody’s Analytics, the nationwide ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble. With all things being equal, a lower ratio means buying is preferable to renting. Even though the price/rent ratio is not as low as it has been, house payments are more affordable than they have been in decades because mortgage interest rates are so low.

And, despite public opinions otherwise, mortgage money is available according to information in the article attributed to Stan Humphries, chief economist at Zillow, a home and real estate consumer website.

The article closes with this advice: “When prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”