Low mortgage rates are making it cheaper to own than rent in many markets.
Freddie Mac’s average 30-year FRM fell again last week to 3.88 percent, an incredible 0.90 percent lower than April of 2011.
Though low rates have become a seeming custom in recent months, an article from CNN Money offers one essential reminder – that with historically low rates comes the lowest average mortgage payments in decades.
According to the article, for prospective buyers looking to purchase a home, now is the prime time. If a buyer were to put 20 percent down on a median-priced home that cost around $154,400, the monthly payments would come to only $616 a month, which is only 12.1 percent of the median U.S. family income.
Because of such scenarios, CNN says that in 98 of the top 100 metro areas, it is currently cheaper to own a home than to rent one.
“If you have good credit, this is the best time in 40 years to buy,” said IHS Global Insight economist Patrick Newport.
Buyers definitely seem to be following Newport’s advice. Last week, NAR released its latest Pending Home Sales Index, a leading measure of future home sales activity, that showed a substantial increase in contracts in March.
The index, which is based on contract signings, increased from 97.4 in February to 101.4 in March, a 4.1 percent increase that brings the index to its highest level since April 2010. Even more pronounced were yearly gains, which were 12.8 percent above the 89.9 of March 2011.
Lawrence Yun, NAR’s chief economist, said the data, which was far above analyst projections, confirms recent expectations for 2012 – that it is a year of recovery for housing.
“First quarter sales closings were the highest first quarter sales in five years,” he said. “The latest contract signing activity suggests the second quarter will be equally good.”
“The housing market has clearly turned the corner,” he continued. “Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses.”