This New Year’s, you may want to make a resolution to go house hunting. Home prices are finally starting to recover, but they’re still low enough to get a great deal. Add to that interest rates that are at historic lows, and 2013 may be the time for first-time home buyers to finally get in the game. “We think the answer, definitively, is that home prices have bottomed,” says Stan Humphries, chief economist of real-estate firm Zillow. “Right now, buying looks very attractive, even for short-term time horizons.”

While the timing may be right, the tougher standards lenders imposed after the housing crash are still very much in place. So buyers with good credit and a hefty down payment may benefit the most.  “Now it’s all about the rules,” says Jeff Conn, a mortgage banker in the Atlanta area.

Window of Opportunity A bevy of data suggest housing prices have finally begun to climb back. So there’s a window of opportunity before prices start a faster upward march. The median price of an existing single-family home was $178,700 in October, up 11% from a year earlier, according to the National Association of Realtors. But that’s still down 13% from $204,800 in October 2007….

Prices are on the way up, but mortgage rates remain in the bargain bin. The average rate on a standard 30-year fixed-rate mortgage hit a record low 3.46% for the week ended Nov. 16, according to data provider HSH.com. The average rate on a standard 15-year, fixed-rate mortgage hit a low of 2.84%. And rates are expected to stay low next year and further out, thanks, in part, to the Federal Reserve’s moves to keep interest rates low until mid-2015.

For first-time home buyers, it may be   easier to buy. Many first-time buyers are opting for loans backed by the Federal Housing Administration, since they now have looser credit and down-payment criteria compared with the tougher criteria for standard loans. The typical rate on a 30-year fixed-rate mortgage backed by the FHA was 3.31% last week, according to HSH.com.

Many potential buyers have sat out of the market and rented instead—because they were waiting for prices to bottom out, found it to be a cheaper option or couldn’t qualify for a mortgage. But the jump in renters  after the housing collapse led to higher rents throughout much of the country. In many cases, it no longer makes financial sense to rent instead of buy. In about three out of four U.S. housing markets, it now takes less than three years of owning a home with a standard 30-year mortgage for buying to be cheaper than renting a similar space, says Zillow’s Mr. Humphries.

Source: Wall Street Journal, Sunday, November 25, 2012, Business Section