Is It Really a Good Time to Buy a House?

Today, New York Times economics writer David Leonhardt has a good column on why it might be a good time to buy a home in some unlikely parts of the United States.

Leonhardt shows that the rent ratio — the price of the home divided by the estimated annual cost to rent one like it — in many metro districts has fallen enough to signal that it is a good time to consider purchasing a home rather than renting one. Housing market experts believe that if the rent ratio is lower than 20, a home is of good enough value to consider buying. If the number is higher than 20, a purchaser is counting on real estate prices to rise to make up the higher aggregate cost of paying a mortgage. (During the worst of the housing bubble, homebuyers in places like Ft. Myers, Fla., were bidding on homes with sky-high rent ratios in the 40s.)

Leonhardt’s analysis shows that homes seem to be a decent deal in markets like California’s Inland Empire and Las Vegas — the very markets that stoked the worst of the housing crisis. But those parts of the country are suffering from high, high unemployment and a long real-estate hangover. And Leonhardt’s analysis does not take into account the fact that many mortgage experts believe those markets still have a ways to fall. I took the markets the Times column indicates might be a good deal — with rent ratios below 20 — and overlayed the data with information from RealtyTrac indicating the proportion of houses that received a foreclosure notice last month. In places like Washington, D.C., and Seattle, just one in 1,800 homes received a foreclosure notice. But in Las Vegas, one in 69 did, meaning a whole lot of houses might be coming on the market soon.

***Article Source:Washington Independent