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Is This a Good Time to Buy a Home?
Honestly, it depends on your specific situation, but this can be a good time to buy real estate.
Home ownership is still the American dream for very good reason. Over any five year period in many decades, investing in a home has been the primary way most Americans have been able to build long term personal wealth. Real estate appreciates over time, and provides tax deductions to offset personal income every year.
What has happened to the real estate market?
Most people now believe that two primary factors precipitated the current economic downturn driven by a collapsing real estate market: 1. high risk mortgages; 2. packaging those mortgages and selling them as various mortgage investment instruments that lost value. The Federal Government, through Fannie Mae and Freddie Mac, strongly promoted high risk mortgage lending without sufficient knowledge and oversight. Greed essentially drove the entire process, and every tax payer is now bearing the burden of that greed and governmental incompetence (yes, those are strong terms!). Democratic and Republican administrations share the responsibility, along with congress under the administration of both parties.
The federal government is now trying to put some long term corrective action in place, and they seem to have succeeded in at least some measure, though there is still long way to go. Two examples of some early success are the 1st Time Buyer Tax Credit, and the new programs put in place to help people in financial distress avoid foreclosure. Those measures will help many Americans retain their homes or buy new homes.
So, is it a good time to buy?
Positives:
- Real estate prices have dropped nationwide over the last year, from single to double digit percentages in different areas.
- High risk mortgages are simply not being made by reputable lenders, so some stability has returned to the mortgage markets.
- The government (you and I are on the hook) is buying bad mortgage investment instruments in the hope that market stabilization will occur and prices stabilize at realistic values once those instruments are "out of the market."
- Many analysts believe we are at, or near, the bottom of the decline in real estate prices.
- People who have good credit (720+ credit score) and cash for a down payment can get mortgage money.
- Interest rates are incredibly low right now (that could change if inflation suddenly takes off).
- The 1st Time Homebuyer Tax Credit of up to $8,000 in 2009.
- It is a buyer's market - there is an over supply of homes for sale, so well qualified buyers have a lot of leverage when making an offer on a home.
Negatives:
- Nobody has a flawless crystal ball when it comes to the economy or real estate market - there is definitely risk.
- Interest rates will go up - it is only a matter of time until inflation does occur given the current money printing and spending spree of the federal government - we just don't know how long the current low interest window will last.
- Real estate values could continue to decline for some period of time (but historically, home ownership has been an outstanding investment over time).
It's not the best time to sell a home, but it definitely can be a great time to buy. We would love to help you find a new home, or if the situation requires you to sell, talk to you about how we market homes. Give us a call!
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