Tuesday, April 01 2008
After reading through the morning paper and my usual websites for news, I have obviously left my house for work lately both depressed and armed with a feeling of utter helplessness. I mean how exactly do you tune out all the chatter on recession woes, the housing slump, the credit crunch, and overpriced oil at $100 a barrel?? After all, I am a Realtor—the very profession that depends upon a good economy and affordable gasoline!! But, despite the fact that we did purchase a Prius this past weekend, Robert and I are finally feeling as if we might have made it through the worst of this God-awful period. Granted, my Prius purchase has afforded me less trips to the gas station, lots more cash in my pocket, and greener air to breathe (lots to feel good about!). However, in relation to the housing market, we feel as if we may have hit the bottom. Rock bottom?? We don’t know. However, things do seem to be turning around a little.
Our clients are always asking—when should we purchase a home in a buyer’s market? Are we buying high? In the past, we have always responded with the usual—“our crystal ball broke right before Microsoft stock hit the market several years ago”. But, now, we are starting to wonder what are we all waiting for? As John D. Rockefeller once said, “The way to make money is to buy when blood is running in the streets.” I have to tell you—things are bright red all over. Stocks have been pounded all year, economic growth has slowed to a stop, recession talk is all over the news, and the Federal Reserve has slashed short-term interest rates at lightning speed over the last 12 months. But, these issues will not remain “issues” forever. After all, what goes down must eventually go up, right? Wall Street usually starts to respond just as our newspaper headlines become the most ominous and rate cuts by the Fed always lift the economy eventually. Given the fact, that we never know we’ve hit a recession until it’s almost over or barely avoided, we may actually be on our way up and I don’t believe this to be solely wishful thinking.
So, this leads us to the housing market and what it means to you… If you have good credit, a little money in the bank and have been waiting for just the right time, we feel as if you might have found it. In some cases, you may have to be just a little more patient especially if you plan to purchase a bank-owned or “short sale” property. Given that they have so many approvals to make, the banks are taking their time responding to offers. However, deals are there to be had and we can certainly do all we can to help you find them. Any hike in interest rates will likely wipe out any greater advantage that a well-negotiated purchase price may afford you. Dan Kadlec of Time Magazine said it best in his article titled, “Ignore the Headlines”:
Consider a home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at a rate of 5.5%. Monthly principle and interest come to $994.31. Let’s say that 12 months from now the same house goes for 10% less, or $197,010. But, by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. AND… you would have spent a year living someplace that you’d rather not be!!”
In essence, life is pretty good right now as a buyer in this market. If you need to sell a home prior to buying, things can be a little more complicated. You will have to sell your home for much less than what it was worth three years ago. What is selling in this market?? Homes that are offering more in the way of appointments than the competition for less! However, if you have a substantial amount of equity in your home, this may be the time to upgrade to that larger 4-bedroom home with a pool!! Keep in mind that we rarely, if ever, get to sell in a seller’s market and buy in a buyer’s market!! But, prices today are worth considering the move! Risks always seem greater when the economy is in the dumper; but, that’s exactly when we should all be thinking long term investments!