[MRM]

It makes a lot of sense to buy a house right now. Prices are still relatively low and interest rates are in the 4% range. The trend in the market is both house prices and interest rates to increase.

The housing supply will continue to tighten because the banks are finally working through the foreclosure glut and institutional investors are buying up the good deals. There is a lot of pent up demand from individuals. Total home ownership is at the same number as it was in 1995 but we have 20% more households, so obviously the home ownership rate is way down. The market isn't going to catch fire overnight, but it is coming back and you're likely to see price increases for many years. Maybe modest increases, but certainly steady.

At the same time interest rates are going to go up. 4% is an anomaly created artificially to prop up the economy. As the Fed reduces quantitative easing, rates will go up. Everyone expects some inflation to start kicking in someday, and the Fed will raise rates even more in response. We won't see rates this low again in our lifetime. I'd encourage you to buy this season if you're going to buy a house.

The caveat is that it costs money to move into a house, including points, etc. The rule of thumb is that it takes about five years to break even on buying a house, considering that you're saving the cost of rent but paying a lot in interest, the cost of moving, and some modest appreciation in home value. So if you're likely to move in less than five years, you're probably better off renting. Otherwise, this year is almost certainly the last best chance to buy a house for a long time to come.