First Weber Blog.

In horse racing, winning a quinella is picking the top two finishers in a race.  The winning payoff is usually worthwhile.   In real estate, there are a number of factors that lead to a worthwhile purchase.  Two of the most important of these factors are: 1) the home affordability index, and 2) the inventory of homes on the market.

Home affordability

Home affordability results from, along with other factors, 1) interest rates and 2) home prices.  Nationally, the home affordability index currently hovers around the historically high number of 180.  This is 80% above average!  Interest rates, although up a tad in the last month, are still enticingly below 5% for a 30 year mortgage.  (Note, November WRA numbers show Wisconsin’s real estate affordability index at 235!)

The inventory of homes on the market is also historically high.  Nationally, the last quarter of 2010 saw 4+ million homes on the market as opposed to the normal number of 2.6 million.  There is also a " shadow inventory" of homes that haven’t yet been put up for sale.  Basic supply and demand principles have resulted in home prices dropping 29% (in some areas much more) from the pricing peak in 2006.

A home purchase should not be a short term proposition.  Based on current prices and choices available, it only makes sense that, if held for a reasonable amount of time, a purchase in 2011 should provide a great return!  Morris Davis, a professor of real estate and urban land economics at the University of Wisconsin-Madison has said "Now may be a once-in-a-lifetime time to buy."

Analyzing the two pertinent factors of affordability and inventory in making a home purchase should reward the winner with an excellent quinella payoff!

Written by Mike Fons, First Weber Group Metro West Office

Did you already know what a quinella was? Let us know in the comments. I like how Mike made the connection here.

Thank you for reading the First Weber Wisconsin real estate blog about two factors that influence a worthwhile purchase: the home affordability index and home inventory levels.