Don't keep me a secret. Let me know if you have someone that needs to buy, Sell or get rich in Real Estate!
Fasten your seatbelt; we are half way through the ride.
Four years ago the media said I was a pessimist and my predictions for a major housing downturn were ignored or laughed at. Now over the past two month many have considered me an "optimist" since I have been indicating that many regions have hit a real estate bottom and others are only months away from recovery. Of course this does not mean double digit appreciation, but at a minimum recovery does indicate one to three percentage points in average appreciation. Beating inflation is all we need to see excellent returns on real estate investments. As indicated in my most recent book, the leverage (loan) behind a real estate investment creates incremental return on investment when we have appreciation at or close to inflation.
The key message that I would like to project to my readers is that all financial mechanisms follow cycles. The question everyone keeps asking is "How long will this down cycle last?". It is realistic to say that in the next 12 months our recession cycle will make way for a new business cycle. It is just common sense. The same was true during our last up business cycle (2003 to 2006) when we had double digit increases in real estate values. It came to an end, as I predicted. Cycles are inevitable but also predictable. Sure it is difficult to pinpoint the exact month, but it is not too difficult to pinpoint the year, especially during a downturn since these cycles typically last months and not years.
Are home prices closer to stabilization?
Today's National Association of Realtors data showed that "Existing Home Sales" jumped by 5.1% in the month of February. Meanwhile the median sales price fell 15.5 percent to $165,400.
Median selling prices are now equal to 2.9 times median household incomes. Just two years ago they were at a ratio of 4.5 times income. We are now at levels not seen since the housing boom in the 1980's. For those of you who experienced our 1982-1983 recession, you know that it was our worst recession on record since the Great Depression. Immediately after the recession home prices started to rebound and a real estate boom occurred from 1984 to 1989.
Our current recession is not the same as 1982, and therefore this recession will not rebound with a real estate boom. Demand will take some time to catch up with supply (currently we have 9.7 months of supply on the "for sale" marketing). However it is extremely likely to follow past business cycles of stabilization over the next two quarters, followed by increased demand and light appreciation over the next few years.
Most of us like to look back and not forward. If you are a forward thinker, as most entrepreneurs are, then you will want to consider real estate as an essential part of your investment strategy, especially now when the market is at or near bottom.
Ed Ross
Should you Rent or Buy?
Although some renters believe that renting is “maintenance free,” they are actually paying for maintenance in their rent – whether they need it or not. Renting offers you no equity, no tax benefit, and no protection against regular rent increases. If you’re paying rent, you’re really just paying someone else’s mortgage. Let’s compare.*
In the table below you can see how in some cases, when you factor in tax deductions you can own for less than the cost of rent! To find out if renting or owning is the right choice for you, give me a call and I'll be happy to assist you.
Rent vs. Own
Monthly Payment $1,000 Monthly Payment $855
Insurance $30 Insurance $50
Taxes $0 Taxes $260
MIP Insurance $45
Total Payment $1,030 Total Payment $1,210
Savings
Interest Deduction $0 Interest Deduction $175
Tax Deduction $0 Tax Deduction $75
After Tax
Net Monthly Payment $1,030 Net Monthly Payment $960
* Approximate Payment/Cost Comparison based on estimated annual tax results. Based on 2.5 tax bracket and on estimated first year interest and taxes. Recommend consulting with tax expert. Payment based on FHA 30-year fixed rate loan with 7% interest rate, sales price of $125,000 and a loan balance of $121,250. Interest rate/rental rates, prices, terms, and availability subject to change without notice. See a qualified tax consultant for more details.
Right now is the best time to buy with interest rates being very low, with a possibility of sinking to levels not seen since the 1960's! If you or anybody you know are currently stuck in the rent trap and want to get out, give me a call or send me an e-mail and together we'll see if buying is the best option for you
Home Prices – Interest Rates – The Perfect Storm
I ran some numbers today just to show what “Fence Sitters” may be costing themselves by taking no action when the conditions are ideal for most anyone who is in the market and qualifies to buy a home.
The “Fence Sitters” are the ones who will sit and watch and wait, and wait, and wait… they wait for ideal conditions to appear. They are the ones who just know, they can feel it in their bones they know that rates are going to get better, even though they are at close to 40 year lows – right now! They also know that home prices are going to come down and still go lower maybe another 5% or even 10% lower than they are right now, even though home prices in Utah are close to what they were back in 2003! Are you a fence sitter? Don’t miss it, Don’t blink!
First time home buyers or those that haven’t owned in the past three years more than likely will qualify for the governments’ $7500.00 tax credit. Provided they don’t use a grant program. I qualify folks on what they can afford as a Monthly Payment which translates into a Home Price Range. I want to illustrate what waiting will actually cost in real dollars.
Loan Amount Rate Payment Payment Rate Home
$320,000.00 @ 5.25% = $1,766.00 $1,766.00 @ 5.25% = $320,000.00
$320,000.00 @ 6.00% = $1,918.00 $1,766.00 @ 6.00% = $294,700.00
$320,000.00 @ 6.50% = $2,022.00 $1,766.00 @ 6.50% = $279,540.00
$320,000.00 @ 7.00% = $2,128.00 $1,766.00 @ 7.00% = $265,566.00
$320,000.00 @ 7.50% = $2,237.00 $1,766.00 @ 7.50% = $252,680.00
$320,000.00 @ 8.00% = $2,348.00 $1,766.00 @ 8.00% = $240,775.00
Payment will go up substantially for the exact same home!
You simply can’t buy as much home for the very same payment!
FACT: Rates are Phenomenal - now!
FACT: Home Prices are Lower and Fantastic!
FACT: We are in the PERFECT STORM! Remember the movie?
Home prices and interest rates are subject to change and both most likely will go up.
I truly believe that once Obama is sworn in as President on January 20th - interest rates are going to go up. I believe they will be around 8% sometime in 2009 - they have to go up to help fix the economic disaster our country is currently facing!
Who do you know who is currently renting but who should buy a home? CALL ME
Who do you know who wants to invest in real estate? CALL ME
Who do you know who want to move up or move down? CALL ME
And don't wait......CALL ME today!
If you have any questions about what you have seen here, Don't hesitate to call me now!
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