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UPenn's Wharton School Says You Should Buy Now



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By : Andy Denton    99 or more times read
There are a lot of reasons to buy a house these days and anyone can attest that prices are at their lowest; that is, if you haven’t checked the latest Case-Shiller Home Price Index yet. The March 30 report (showing January 2010’s results because of a data compilation lag) reflects home values slowly gaining ground. The press release states, “(The indices) show that the annual rates of decline of the 10-City and 20-City Composites improved in January compared to December 2009. In fact, the 10-City Composite is unchanged versus where it was a year ago, and the 20-City Composite is down only 0.7% versus January 2009. Annual rates for the two Composites have not been this close to a positive print since January 2007, three years ago.”

That’s one good news for sellers as the market is soon to go on their favor. But researchers at Wharton School of the University of Pennsylvania has one advice to everyone: now it’s the time to buy a home. In “Can Owning a Home Hedge the Risk of Moving?” , Wharton real estate professor Todd Sinai and co-author Nicholas S. Souleles believe in the rewards of owning a home more than any other.

The press release states, “When the correlation between housing prices in these corresponding housing markets is taken into account, price increases and declines track closer than they do in the market as a whole, reducing the amount of volatility, or risk, involved in buying a house. In other words, by buying now, consumers can protect themselves from increases that could price them out of a housing market they might move into later, the authors find. Sinai notes that while homeowners often focus on the market value of their home, what really matters is the relative price—or how that figure compares to the price of finding shelter when they decide to move to a new market.”

The researchers were inspired to study the market when they found out that their MBA students face a dilemma of owning a house in Philly while they are completing their degree or saving up for a house in a city where they’ll relocate to once they get a job offer. The study found out that “individuals tend to move to other regions where the difference in house prices between the two markets moves up and down less dramatically than house prices in the destination housing market alone. As a result, making an investment in a home is actually less risky than it might appear at first.”

These results are interesting to me.

First, there’s truth in their advice that buyers must act now to take a shield against increases. The Case-Shiller Home Price Index is showing signs of a rebound as what I’ve stated so acting early on is a good strategy.

Second, realtors are given more insight as to the emigration patterns of graduates and they’d not fear so much if their state suffers from foreclosures. There’ll be new markets coming. Thanks to those who come from states similarly distressed.

Third, this may be contradictory to my second opinion but the findings are not too applicable these days to the research’s inspiration. Aren’t MBA graduates facing relatively poor job offers upon graduation? This is a clear sign of home purchase delays.

Still, if you have the money, follow their advice.
Andy Denton is the COO of Realty.com. Realty.com is a real estate search portal, dedicated to connecting home buyers and sellers to trusting real estate services. Follow the Realty.com blog for up to date housing news and trends. And monitor local mortgage rates at RealtyGadget.com.

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