Remember when home values were soaring a few short years ago? Homeowners were thrilled; Realtors, loan officers, and contractors were busier than ever. Home prices were increasing at a frantic pace. It seemed as if real estate was a "can't miss" investment. We could not believe how quick home prices jumped -- it seemed like it would never end. (Boy, were we wrong!)

One group of individuals was not enjoying this rapid appreciation -- the entry level home buyer. The typical young person or family was being priced out of the market. I had several clients who kept chasing home prices, making low offers, and being outbid by another higher offer. Every month that went by, these potential home buyers would have to increase their offer price. The problem was that they did not increase their offers quickly enough to match the rate at which the market was appreciating. As prices continued to climb, they had to stop trying to purchase a home, and were forced to rent.

As it turns out, that may have been a blessing. Now that the real estate market has corrected itself, or is in the middle of correcting itself, home prices have dropped to a level that these families can afford. We are seeing increased activity in the $150,000 - $275,000 range. Despite what the news media is telling us, there are still home loan programs that offer 0% to 3% down payments. These loan programs are not the "sub-prime" type, but the traditional FHA, VA, USDA, and PERS loans. They all require income, asset, and credit qualifying. (This is a good thing!)

When you compare the monthly house payment in this range versus renting a small home, they are virtually identical. A $200,000 home purchased with 3% down payment will have an approximate monthly payment of $1,550 (including property taxes and insurance.) This same home might rent for $1,300 per month. After you factor in the income tax savings of owning your own home, you would actually spend fewer dollars overall by owning your own home instead of renting. Plus the added benefit of potential appreciation.

There is always a bright spot in any economic downturn. Because home prices are decreasing, an entirely new market of potential home buyers has opened up.

MARKET UPDATE