Now is the Time to Buy!

Consumers who take advantage of this excellent buying climate to purchase a home will find that it is a great long-term investment.

Buying a home is the largest investment most families will ever make and homeownership is the single largest creator of wealth for Americans. It allows families to build financial security as the equity in their homes increases. As homeowners repay their mortgages, their debt declines, while overall wealth and equity in the home grow.

Although local housing markets periodically adjust according to overall economic conditions, over the long term, real estate has consistently appreciated, and we appear to be approaching the bottom of the current downswing. The rate at which home values have been declining is slowing down. Once we turn the corner, home values will start edging up and the long-term outlook is very promising.

Remember, on a national level, home appreciation has historically risen 5-6 % annually. Five percent may not seem to be much at first, but take a look at the numbers. If you bought a $200,000 house and put 10% down, that would be an investment of $20,000. At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $20,000. Your annual " return on investment " would be a whopping 50%! In contrast, putting the same $10,000 in the stock market and registering a similar 5% gain, (even in today's volatile market) would only yield a $500 return on investment.

The big difference in returns is a result of " leveraging" - putting down a small amount of money to earn the biggest return. This is especially important for first-time home buyers. Entering the market now starts you on the road to home price appreciation. The profit from selling a "starter" house will enable buyers with growing families to afford a bigger home in the future.

Compared to other investments, such as stocks, a home is a relatively stable investment. Homes tend to increase in value at a steady, reasonable pace while alternatives such as the stock market can be extremely volatile. For example, the median-priced home in 1996 was worth $140,000. Today, that same home would have gained more than $70,000 in value. The real value is worth even more, simply because the homeowner has paid down a significant portion of the mortgage in the interim.

Tax incentives are by far the biggest and best tax breaks for middle America.

Collectively, home owners save nearly $100 billion annually on mortgage interest and property deductions alone. These tax incentives are designed to make owning a home more affordable. In most instances, all of the interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income. These deductions can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment.

To look at this another way, if you are in the 28% tax bracket, you only pay 72 cents on the dollar in mortgage interest payments. The best tax break available to homeowners is when they sell their primary residence. A couple who owns and lives in their home for two years and then decides to sell can keep up to $500,000 of the profit tax free. (A single owner can keep $250,000). If the couple uses these gains to purchase a bigger home, and live in that home for at least two years, the same rules hold true when they go to sell again. This is one of the biggest tax advantages of homeownership and a great way to build household wealth.

Owning a home is like investing in an automatic savings account.

You accumulate savings in two ways. Every month, a portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Each year, a greater percentage of your mortgage payment goes to paying down the principal.

Second, your home appreciates over time, making it one of the very best financial investments. As your property appreciates, you build up equity in the home, increasing your household wealth. Many families elect to take out home equity loans to help put children through college, make home improvements, start a new business, or pay for medical costs. Interest payments on home equity loans are fully deductible up to loans of $100,000. By comparison, consumers who carry credit card balances cannot deduct the interest and can pay rates as high as 20%, more than double a typical home equity line of credit.

Owning a home provides price stability.

While a rent payment can change substantially from year to year, you will have the same monthly payment for 30 years under a fixed rate mortgage. Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage.

Interest rates today are running near historical lows and not nearly as volatile as they were in the late 1970's and early 1980's. Knowing their mortgage payments will stay the same month after month provides households with a sense of financial security and also acts as a hedge against inflation.

In summary, owning a home provides: the best investment, a great tax benefit, financial freedom to send a child to college or proved a nest egg for retirement.

Not only is homeownership a stepping stone to a future of financial security, it provides a permanent place to call home and enormous personal satisfaction. It strengthens the nation's people and it's communities. Homeownership creates community stakeholders who tend to be active in charities, churches and neighborhood activities. Homeownership inspires civic responsibility, and homeowners are more likely to vote and get involved with local issues. Americans associate homeownership with economic success and the accumulation of wealth. It is truly the cornerstone of the American way of life, and the fulfillment of the American Dream.