“The Clouds Haven’t Quite Parted,” the paper indicates in its subheading, “But the Long-Term Case for Home Ownership Is Looking Stronger.” That is because builders have stopped building new homes (for now) and the rate of household formation will climb in the next few years, according to demographers. When short supply, after the foreclosed properties work their way through the system, meets increased demand, logic and experience tell us prices rise.
Of course, you want to be confident that you can sell your home at a fair price before you consider your long-planned move to a warmer climate. The Journal's argument is good news for you: The relationship between incomes and home prices has dropped almost 21% below the 15-year average that ended in 2010. Home affordability has reached back to 1990 levels. In the coming months and years, if you price your home appropriately, you could very well find an enthusiastic buyer for it.
I have encouraged readers previously that if they can afford to rent a home in a golf community they might be considering, that is a good way to get to know the neighbors and fellow golf club members before making a multi-hundred-thousand-dollar commitment. That has been an effective financial strategy as well in the last five years as rental costs have been significantly lower than the costs to purchase and finance a home. But with the continuing drop in home prices, that is no longer the case in many areas. It now may be cheaper -– in some cases, significantly cheaper -- to buy a home comparable to one you would rent.
The link to the Wall Street Journal article is here. If you cannot connect (for some articles a subscription is required), please contact me and I will email a copy.
The next issue of our own newsletter, Home On The Course, will explore some of these issues in more depth using the wit and wisdom of Mark Twain as our foil. Although the issues are serious, we will try to inject a little levity into the discussion. If you have not subscribed to our free newsletter, you can do so in the column above. Just click on the box, fill in your name and email address, and we will make sure you receive the June issue of Home On The Course and all future issues.