May 8th, 2012 5:00 PM by Office Fax
Buying a home can be a daunting task for anyone, especially for those who have never been through the process before and are thus looking to be first-time home buyers. There are tons of questions to ask, as well as things to consider, if you find yourself in this position. One of the first issues you must address is whether you want to buy or whether you want to lease. In some cases, one or the other may not make sense or even be possible for you. Here are four reasons to consider buying a home today in the St. Louis area:
· You are ready to commit to living an area for at least the foreseeable future
· You are starting to think long-term about making a financial investment
Generally speaking, a piece of property has historically been considered to be a good long-term investment with a typical annual appreciation of 5% annually based on data over the past 40 years. Although this number has taken a hit in recent years, there is no reason why real estate values cannot return to its steady appreciation levels over the next few years with the increasing employment and population levels in the US.
· The housing prices in the area you are considering at a reasonable and affordable level based on your current budget and income
Many websites have tools that can help you calculate how much you should spend on buying a home. The link below has an easy fill-in-the-blank calculator to find such a number.
http://realestate.msn.com/BuyAndSell/Tools/HA_CALC.aspx
The size of loan you can get, as well as the interest rates on that loan, can be tricky to estimate yourself. Consider talking to your real estate agent and your bank to get a better idea of these two things.
· The housing market in the area you are considering can be classified as a buyer’s market.
A buyer’s market for our purposes is defined as an area where it is more financially sensible to buy rather than rent. This market can be created by variety and combination of conditions such as having more people looking to sell than are looking to buy or having a surplus of spaces to rent. Such a market can be identified using a metric called the price-to-rent ratio. To make it simple, this ratio takes the average listing price (167,680 for a 3 bedroom house in St. Louis) and divides it by the average annual renting price (18,000 for a 3 bedroom leasing). Generally speaking, areas with ratios between 1 and 15 are buyers markets, and it is considered better to buy than rent. In areas with a ratio over 21, it is better to rent. St. Louis’ ratio is 9, which compared to the national average of 19, makes St. Louis a great place to buy your first home. In 2008, the national ratio was 32, so there definitely has been a favorable shift in the market for buyers in recent years.