Time may be right for renter to buy

If you’re renting a home, you’re probably wondering when the time will be right to take that big step and buy. It’s a major financial decision, and one that needs to be taken seriously.

Here are some of the questions about timing I am most often asked:

Q: John, does every family need to own a home?

A: No, the responsibilities of owning a home aren’t for everyone.

Some folks prefer the flexibility of being able to move easily, especially while they are searching for a job that may require them to move to another city. Others simply prefer that others take on the responsibilities of ownership, like mowing the lawn or raking leaves. Each person needs to make their own decision.

Q: What percentage of American households now own the home they live in?

A: Less than in the recent past. For many years, the homeownership rate was almost 70 percent.

But in the recent great recession, many owners faced financial hardships for a variety of reasons, and eventually lost their homes to foreclosure or short sale. The rate of ownership peaked in 2004-2005 at just over 69 percent.

Today, according to the census bureau, we are closer to 63 percent, even rents have increased dramatically.

Q: Are home prices rising or falling? Are we back to where we were before the big crash?

A: According to most reports, median home prices peaked in 2006 and bottomed out during 2012.

Since then, prices have risen almost steadily, but we have still not recovered all the ground that was lost. My guess is that we will see a complete recovery in values by the end of this calendar year, but only time will tell.

Q: John, you’ve said interest rates are the single largest expense facing homeowners. What about interest rates today?

A: Home loan rates are still remarkably low. Thirty-year fixed rate loans are in the range of 3.75 percent, but the real bargain is in 15-year fixed rate loans, now available in the range of 2.875 percent.

Q: After the real estate crash, many lenders tightened lending requirements. That has kept many folks from being approved. Is that still the case?

A: As often happens, our government rushed in to “solve the problem” after the real estate crash. One of the results was the Dodd-Frank legislation, making lenders potentially responsible for any home loan that goes into default, even years into the future. As a result, lenders decided to limit their exposure by eliminating loans to all but only the most qualified.

Fortunately, reality has crept back onto the marketplace, and we are now seeing a trend toward more common sense underwriting guidelines, coupled with the slow return of loan programs aimed at first time buyers and those traditionally underserved by the lending community.

Q: You’ve said home prices will probably continue increasing, and that interest rates won’t be this low again for many years. Is this our last chance to buy a home?

A: I won’t say there will ever be a complete “last chance” to buy a home. But I will say that today’s combination of super-low interest rates and reasonable prices presents a powerful opportunity for those who truly want to own a home.

We can’t know for sure what the future holds. But if the past is any lesson, then we can reasonably say that owning a home is a handy way of providing yourself a place to call home while at the same time introducing what I call “a forced savings plan.”