Are housing prices and mortgage rates too high now?

Q: Did I miss my chance in the housing market? My wife and I are young and could not afford a down payment when prices and mortgage rates were low. Now that we have saved enough for a down payment, both prices and mortgage rates are up. Should we wait for a better time?

A: Only in the context of the past few years could you look at this as a time when home prices and mortgage rates are prohibitively high. Viewed in a longer-term context, both are much more reasonable -- especially mortgage rates.

Take prices, for example. According to the S&P/Case-Shiller Home Prices Indices, a broad composite of prices in 20 major metropolitan areas has risen by 23.75 percent since hitting bottom in March of 2012. If you have only been following the housing market since then, it is understandable that you might think things are getting a bit pricey. However, home prices are still nearly 20 percent lower than they were at the peak of the housing boom.

To look at home prices in an even longer-term context, over the past ten years housing prices have risen by an average of 1.16 percent a year. That is hardly the pace of a runaway market.

As for mortgage rates, according to the Federal Reserve, 30-year mortgage rates climbed by 1.11 percent last year, from 3.35 percent to 4.46 percent. Still, that 4.46 percent is more than 4 percentage points lower than the long-term historical average, which is 8.56 percent. So, while you may not be capturing mortgage rates at their absolute bottom, if you buy now, you can still get one of the lowest mortgage rates in history.

In short, neither home prices nor mortgage rates are at their lowest levels right now, but neither are they unreasonable. The key comes down to smart shopping -- get to know your local housing market well, and compare mortgage rates to find the best deal.

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