Home Builders Association of Hartford County, INC.

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It's Still a Great Time to buy a Home

With near-record low interest rates, competitive prices and a large selection of homes to choose from, the current market strongly favors new home buyers. But economic conditions indicate that consumers who are sitting on the fence hoping to get a better deal probably shouldn't wait any longer.

"Changes in interest rates, cost of building materials and inventory of unsold homes will have an impact on the buyer's market," said Chris Nelson, President of the Home Builders Association of Hartford County. "Buyers who take advantage of today's optimum conditions can get more home than they could just a few years ago, but it's not going to last forever."

Interest rates, although lower than they were a year ago, have started to move up. Rates on 30-year Freddie Mac fixed-rate conforming loans are 1/2 percent higher than they were two months ago in April. And Business Week's senior editor and senior economist James Cooper recently wrote that "On June 11, the futures market was betting heavily on at least one increase in the Fed's target rate in the second half of the year."

What it costs to build a new home is likely to increase as well, which builders will have to reflect in their prices. According to Bernard Markstein, senior economist for the National Association of Home Builders (NAHB), "Higher energy prices and industrial expansion in the rest of the world are continuing to put additional upward pressure on construction material prices. Already, prices for building materials for single-family new construction, which were rising by about 2.5 percent until a few months ago, increased 4.7 percent from May 2007 to May 2008."

Finally, builders today are offering attractive incentives to sell surplus inventory. But they are also adjusting their production in the slowdown, so when the homes currently on the market are sold, there won't be as many to choose from for the next couple of years. And builders won't be as inclined to make deals.

"Owning a home remains the best way for families to grow their wealth over the long term, and a fixed-rate mortgage protects you against increases in rent that could come with inflation," said Nelson. "New homes also provide great energy-efficiency that will benefit the family for years to come. Ultimately, a purchase of a home is an investment in your family and your community."