Sue Fox, @Properties. Direct 773.816.1788

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Buying a home “never a better bargain”

filed under: Buyers, Chicago home prices, Market conditions, Mortgage Rates posted on September 3rd, 2010

A SWEET DEAL FOR 2010:

A SWEET DEAL FOR 2010: This renovated 3-bedroom Lincoln Square house -- with a new roof, siding, windows, paint and appliances -- sold for $515,000 in June.

It always amazes me when I compare today’s cautious home buyers to the buyers of 3 or 4 or 5 years ago, who were willing to spend top dollar, at interest rates of perhaps 6 and 6.5%, to buy a home. Buying Chicago real estate is a MUCH better deal now, with prices down 20-30% in some neighborhoods, and banks offering rock-bottom mortgage rates of 4.5% or less for a 30-year, fixed loan.

Basically, if you buy today, you could get the same property at a huge discount compared to what you would have spent on it a few years ago. Yet buyers seem to be sitting on their hands during one of the best buyer’s markets ever, afraid to make a move.

So I was glad to see that Karl Case, an economics professor who was one of the creators of the widely-read Case-Shiller housing index, wrote an op-ed piece yesterday in the New York Times explaining that real estate was still a good investment, especially given today’s low prices and interest rates.

“This financial crisis has made us all too aware that we live in a Catch-22 world: the performance of the housing market drives the economy, and the performance of the economy drives the housing market,” Case wrote. “But housing has perhaps never been a better bargain, and sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we’ll even start building again.”

BACK IN 2005:

BACK IN 2005: The same Lincoln Square house, located at 5069 N Winchester, sold for a similar price, $517,000, but without all the upgrades. I bet the new owners got a much better deal on their mortgage rate in 2010, too.

Case explained that the advantages of today’s lower home prices and interest rates translated into savings of hundreds of dollars per month on an ordinary house. He also pointed out that home owners can deduct the interest they pay on their mortgage, a tax break unavailable to renters.

This is, quite simply, an extraordinarily good time to buy a house. That’s what I try to tell my skittish buyers, emphasizing to them that if they plan to stay in the home for years (which I recommend), in all likelihood they will be making a sound investment.

But perhaps all optimistic realtors sound like… optimistic realtors. Maybe Karl Case says it better. To read Case’s piece, click here.

Written by Sue Fox //

  1. Paul

    I can help you figure it out. For the past 12 years we were aggressively told how good an investment housing is and how everyone needs to buy now or they will probably never be able to again afford to buy a house. It’s pretty well known how incorrect and willfully misleading that turned out to be in order to over cook a market that benefited everyone except the people actually buying/owning homes.
    Now for the past 2 years we-re continually told how interest rates will rise next week! as will prices!! and if we don’t buy now at these best prices in history!! we will never be missing the biggest opportunity we’ve ever had!!! Yet, every month prices keep going down, more foreclosures enter the market, the banks keep lowering rates…so, whats the rush? No one believes you anymore. That’s what happens when for a decade you work in the interests of yourselves (agents) instead of your clients (home buyers). So people have no money (we have 10% unemployment and lower wages than we did in the mid 90s), and people don’t believe anyone involved in the real estate business anymore.
    I hope that clears things up somewhat.

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