The Dow Jones Industrial Average (DJI) closed yesterday at its highest level since July 2008. When the closing bell rang, the economic bellwether was at 11,144.57 reflecting an increase of 37% in the last year alone. According to the latest Standard & Poor’s/Case-Shiller National Home Price Index, 9 of the 20 cities that comprise the well-respected indicator, posted year-over-year increases in median home sales prices in January. The report goes on to advise that average home prices across the US are at similar levels to autumn of 2003.
While waiting for “the bottom,” that theoretically crucial moment of optimum opportunity may have already passed. But the practicality of the matter is that each individual must assess his or her conditions when considering the purchase of a new home, a second home or a retirement property. There are some key issues that should be considered in addition to purchase price. Interest rates remain at historical lows – in the 5% range – and lenders are once again funding jumbo loans, (mortgages exceeding $417,000) an encouraging indicator of a loosening credit market and continued interest in high-end, upscale residential investment. Further, more buyers are paying cash for property. According to Move.com, more than 12% of buyers plan to use 100% cash to purchase a new property and nearly 13% will use a cash down payment of more than 50%. This type of buying activity would be expected to result in increased pricing.
So let’s look at the big picture: 1) The DJI continues to soar, reflecting investor confidence. 2) Based on GDP expansion of 5.6% last year, the economy appears to be in the early stages of recovery. 3) The unemployment rate is a lagging indicator, i.e., one of the last to provide positive input, and yet February saw the addition of 162,000 jobs. And lastly, the Consumer Price Index is holding relatively steady, theoretically providing more bang for the buck.
As buyers come off the bench, inventories will diminish and prices will increase as demand begins to exceed supply. If you are in the market for a new or second home, the cost of living in your market of choice should carry as much weight as the cost of the home you wish to purchase. According to a study conducted by Where to Retire magazine, certain markets can provide as much as a 30%+ cost of living savings. Myrtle Beach, SC, and Asheville and Wilmington, NC rank amongst these, and tax-free states such as Florida and Tennessee are seeing increased buying activity. As the economy recovers, so will the housing market. As the housing market recovers, prices will ultimately rise. So is now the time for you buy? If so, check out PrivateCommunities.com to learn about the myriad opportunities that are currently available.
