Homeownership is Within Reach

by Joel Barkman

Bolstered by favorable interest rates and low house prices, housing affordability remained near its highest level nationwide for the sixth consecutive quarter since the series was first compiled nearly two decades ago, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released last month.

Data that further supports the philosophy that many of Golden Rule Builders' clients are realizing as well. The combination of low interest rates, stable material pricing, and the ability to work with a quality builder equals value and opportunity. For a small business, a track-record of proven quality and service has been rewarding in challenging economic times.

The HOI also indicated that 72.3 percent of all new and existing homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. The index for the second quarter was slightly more affordable than the previous quarter and almost equaled the record-high 72.5 percent set during the first quarter of 2009.

Until 2009, the HOI rarely topped 67 percent and never reached 70 percent.

"Homeownership is within reach of more households than it has been for almost a generation," said NAHB Chairman "Interest rates continue to hover at historic low levels, the economy is beginning to rebound and with house prices starting to stabilize, conditions are beginning to draw home buyers back into the market, which is a positive step on the path to recovery."

At a time when many in the news media have been suggesting that the nation's commitment to homeownership should be abandoned, Economist Karl Case, in an article entitled "A Dream House After All," says that the effect of homeownership on household wealth "has been huge" and that today's market offers many significant advantages for prospective buyers.

Definitely working to the advantage of home buyers in recent weeks has been a continuing downward trend in mortgage interest rates.

In the results of Freddie Mac's Primary Mortgage Market Survey for the week ending on Thursday, Sept. 2, 30-year fixed-rate mortgages reached yet another record low, falling to 4.32%. This was the 10th time in 11 weeks that rates hit a historic low.

Meanwhile, Time magazine's Sept. 6 cover story, "The Case Against Homeownership," has drawn sharp criticism from home builders responding to its many inaccuracies but has also apparently raised the hackles of the publication's own readership.

The article, which describes the American dream of homeownership as an outdated ideal, appeared first in excerpted form on the magazine's website, elicited a blistering response from NAHB Chairman.

"Homeownership is not the monster under the bed here," the Chairman said. "It is the bulwark of our society. Homeownership provides shelter and stability to tens of millions of Americans and their families as well as to countless communities and neighborhoods. Real estate taxes on owned homes are a prime component in local government budgets.

"Homeownership is by far the single largest creator of wealth for Americans. And, over the long term, real estate has consistently appreciated, even through periodic adjustments in local markets in response to economic conditions."

In his letter, the NAHB Chairman also suggests that restoring the health of housing is needed to move the U.S. economy more decisively along the road to recovery.

NAHB continues to aggressively challenge anti-homeownership messages, which have been surfacing lately with greater frequency in national and local media outlets. The association has been working with such groups as the National Association of Realtors, which immediately responded to the Time story.

"The financial crisis has made us all too aware that we live in a Catch 22 world:" continues Economist Karl Case "the performance of the housing market drives the economy, and the performance of the economy drives the housing market. 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. The American dream is not dead — it's just taking a well-deserved rest."

If you're still looking for your piece of the American dream, now may be the best opportunity in years — just "Ask a Builder."

As always e-mail your questions or comments to joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119.

Barkman is past president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

Read Joel's column weekly in the