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Buying a Home? Now May Be the Best Time

NEW YORK (TheStreet) -- A new report from RealtyTrac sheds light on a rapid increase in the cost of owning home, which means that if you've been waiting to make a purchase, it might be best to make a move right now.

Before the collapse of the U.S. housing market in 2008, the conventional advice for a first-time homebuyer was to save up money for a down payment and purchase a home "as soon as you can squeak by." That changed during and after the housing crisis, as mortgage loan interest rates dropped and purchase prices in many parts of the country went down by over 50%.

But now the market is changing again. For one thing, long-term interest rates rose during the second half of 2013, although rates have pulled back a bit so far this year, and are still quite low on a historical basis. But the Federal Reserve will likely finish winding down its "QE3" bond purchases this year, which should put significant upward pressure on long-term rates, and home prices are continuing to rise.

According to RealtyTrac's housing affordability analysis released on Thursday, the estimated median monthly payment for a three-bedroom house purchased during the fourth quarter rose 21% from a year earlier. That estimated payment includes mortgage loan principal and interest, taxes, insurance and maintenance, less the estimated income tax benefit from deducting the mortgage interest from the borrower's taxable income.

RealtyTrac's analysis reflected an average 10% year-over-year rise in home prices for the 325 U.S. counties included in the study, along with "a 33 percent increase in the average interest rate for a 30-year fixed rate mortgage as reported by Freddie Mac in its Primary Mortgage Market Survey."

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That's a huge change, year-over-year. Of course, the situation differs by region, but RealtyTrac's figure provides plenty of food for thought.

"The monthly cost of owning a home is still less than renting in the majority of markets, but the cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes, driven not by shoddy underwriting practices this time around but by investors and other cash buyers who are not tethered to the typical affordability constraints," said RealtyTrac vice president Daren Blomquist in the firm's press release.

"One simply needs to look at the minimum income needed to qualify for a median-priced home in some markets to realize the extent of the disconnect between prices and incomes," Blomquist continued. "For example, in Los Angeles County, the minimum qualifying income needed to purchase a median-priced home is at more than $95,000, up from about $68,000 just a year ago."

More scary figures. What do they mean to you? If you have been saving up for a down payment and looking forward to buying a home, you had better test the waters now. There's no harm in gathering information and seeing what's available. You may be pleasantly surprised.

Wells Fargo (WFC - Get Report) and JPMorgan Chase (JPM - Get Report) are responding to the decline in home refinancing activity during 2013 by lowering their underwriting standards, making it easier for many people to qualify for a loan. Wells Fargo -- the nation's leading mortgage originator by volume -- has lowered its minimum FICO score for borrowers applying for loans insured by the Federal Housing Administration to 600 from 640. Do you qualify for an FHA loan? If you do, you will be able to make a much lower down payment than you would make for a conventional loan. Meeting with a mortgage lender at a bank can answer that question.

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