Housing becoming more affordable

Buying a home is one of the biggest and most influential purchases a person will probably make in their lifetime. Not only is it a place of shelter, but it can also be used as a tremendous wealth building opportunity.
Anyone who has ever bought a home knows that it can be very difficult to accumulate the funds to make such a big purchase, especially considering the price of real estate these days.
Many areas across the nation, like right here in San Diego, saw home prices rise dramatically during the last few years.
This made the dream of purchasing a house nearly impossible for many Americans. But as prices are slowly falling, many people who were unable to own a home a few years ago may see their dreams coming true.
According to a December 13, 2006 article by Ruth Simon of The Wall Street Journal, “First-timers begin looking at houses again,” lower prices and mortgage rates are contributing to this new affordability factor.
“High home prices have helped drive many first-time buyers out of the housing market. Now, with prices falling in many areas, there are some signs that buyers are beginning to drift back.”
“First-time buyers play a key role in the housing market. They provide a source of new demand for homes, and they also make it possible for owners of entry-level properties to trade up, creating a ripple effect that affects higher-priced sectors of the market. Declining affordability has made it difficult for first-time buyers to buy homes in many parts of the country, an important factor in the recent housing downturn.”
But this seems to be changing, as real estate agents across the country have been reporting a surge in the amount of first time homebuyers looking to make their first big purchase.
This is because sellers have finally begun to cut their asking prices and the interest rates on most mortgage products have also decreased recently, presenting a new opportunity for those who were unable to afford a home in the past.
“Sam Schneiderman, broker-owner of the Greater Boston Home Team, says he has seen ‘a real surge in first-time buyer activity’ in the last two to three weeks as lower prices draw buyers who think the market may be close to bottoming out. Kevin Freadhoff, an agent with Realty Executives of Southern Arizona in Tucson, says in the past 60 days he is seeing first-time buyers ‘start to warm back up again. They are seeing that houses have become more affordable.’”
The problem of housing un-affordability for first time buyers is nothing new. According to a report from the National Association of Realtors, 45 percent of homeowners bought their home with no money down, meaning it is more difficult for new potential homebuyers to come up with such a large amount of cash for the down payment.
But the days of extreme un-affordability could soon be over as the Fed continues to leave rates where they are and prices continue to drop.
“The National Association of Realtors reported that the median price of an existing home fell 3.5% in October from a year earlier, the largest decline since the group began collecting these data in the late 1960s. The average rate on a 30-year fixed-rate mortgage now stands at 6.16%, the lowest level since October 2005, according to HSH Associates in Pompton Plains, N.J.”

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