I live in a rural town where a neighboring plot of mixed farmland on 36.5 acres is going for about $4,600 an acre. There are also several homes and smaller bits of land for sale in the area. I always keep an eye out for places that come on the housing market.

We bought our slice of paradise (8.3 acres with a farmhouse, barn and other buildings on a dead-end road) last Thanksgiving, so I have an interest in how well our new home is holding its value.

So far, so good...

But I fear that other neighborhoods aren't doing as well as we are.

 

According to Zillow.com, Wisconsin's home prices have dropped 5.5% in the past year. Not the best news, but certainly not the worst, either... Michigan homes have lost 12.4% and Minnesota a whopping 13.2%!

Of course, not all counties are stabilizing.

On Saturday, I was driving through a small but affluent suburb of Milwaukee called Fox Point. The lawns were fresh cut, trees trimmed, cars washed and flowers wonderfully bright. Most homes had at least two cars, one of which was from a luxury brand like Mercedes or Lexus.

But what struck me most was the number of homes for sale. I was driving down Lake Drive between Good Hope Road and Bradley Road. It's about a three-quarter mile span.

At least one in three homes was for sale.

This town is in Milwaukee County, and the county has seen home values drop 14.3% in the past year. Over the past five years, the average home price has fallen from $140,000 to $100,000.

Realtor.com lists 73 homes for sale in the Fox Point area. The town is only 2.9 square miles.

Some homes are listed for over $1 million, while others are listing for under $300,000. The size of the home and lot are huge factors, and in this established neighborhood, there's a lot of variety.

But more than 10% of the homes listed in this area have already reduced their price once.

Yet some of the talking heads are saying to watch for a turnaround in the housing market. Home prices for 16 of the biggest metro areas have climbed to $246,000 from $224,900. And while this is good news, homes are still spending 140 days on the housing market.

Does this mean it's time to swoop in?

Buying a home is still a cheap deal, if you can find a bank willing to loan to you. Credit is still pretty tight for consumers with less-than-perfect scores. And despite the weak numbers from the housing market, now might be the time to buy.

Not only because of the possibilities of rental income, as Jared told you about last Tuesday, but because of a new wave of potential home buyers.

A Wells Fargo report says that there are 51.5 million people in the U.S. between the ages of 20 and 31. These folks are called "millennials," and there more of them than there were baby boomers in 1977. The report says 66% of millennials that don't own a home see themselves buying a home in the next five years.

This kind of demand can really push home prices higher.

Another reason why buying a home now might be a good idea? Interest rates have started inching higher.

After nine weeks of falling, the interest rate for a 30-year fixed mortgage jumped slightly to 4.5%. Analysts are predicting higher rates from here on out. Waiting to buy could cost you more money down the road.

A 30-year fixed loan for a $300,000 home with 20% down and an interest rate of 4.5% will give you a monthly payment of $1,528.54. You will pay almost $198,000 in interest over the life of the loan.

But if interest rates go to 5%, your payments jump to $1,600.87 a month. Not that much different... until you look at the amount of interest you pay over those 30 years.

At 5%, you will pay more than $223,800 -- a difference of more than $25,800. At 6%, you'll pay $278,000!

The difference in interest rates is kind of like a teeter-totter. At some point, you'll be paying more in interest over the life of your loan than your home is worth. Buying at a lower rate can clearly save you tens of thousands of dollars.

Just four years ago, rates were at 5.75%.

Once homebuyers come back into the housing market, demand could also push rates higher.

Buyers want deals, but they also want a stable value. They don't want homes to drop another 14% over the next year.

And if you look at certain markets and certain homes, prices are stabilizing. I want to be clear: Looking at specific markets isn't really cherry-picking... It's comparing apple to apples. According to the raw data, home prices in April 2011 fell by 7.5%.

But this figure includes "distressed sales," things like foreclosures.

Excluding distressed sales, prices fell by 0.5%.

That's a big difference, and in stable neighborhoods, this figure is much more relevant. If you're currently renting, now could be a prime time to buy.

As Jared told you in his article, residence rental rates are up 1.3% over the past year. Analysts like Greg Willett, vice president of MPF Research expect rates to climb 5% this year and another 5% next year.

Don't expect home prices to rebound quickly, or even start rebounding nationally in the next year or so. It will be a slow turnaround -- kind of like a huge oil tanker. It will take time. But for those of you in certain circumstances, now could be one of the best times to become a homeowner.

Having the money for a down payment, with good credit, and the desire to get out from under climbing rent sounds like the perfect combination to me.

Editor's note: Just as those "millennials" -- all 51.5 million of them -- hold the fate of our housing market, across the globe they have even more power. As the force behind this year's "Arab Spring," this freedom-starved generation is fighting mad.

Written by Sara Nunnally for Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content orwww.taipanpublishinggroup.com.