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Posts tagged ‘interest rates’

5 Quick Real Estate Tips for April

1. Be Ready for the Pre-appointment Appointment
In order to best take advantage of the opportunities this year will bring, make sure you are ready to speak real estate at any moment. Whether it is at the food store, the movies, or at your child’s ball game, people are again talking about real estate. Be prepared to intelligently articulate answers to the questions that come up. Ensure this by being very mobile with your information (smart phones, iPads, or tablets).

2. Understand the Advantages of Owning Over Renting
We sell real estate for a living. We must be prepared to be an evangelist for homeownership. Know that owning is less expensive than renting in 72% of the country. Be able to explain all the financial benefits of owning a home and learn the non-financial reasons people buy a home.

3. Know That Today’s Mortgage Opportunities Will Never Exist Again
Today, a buyer can purchase a home with a 5% interest rate guaranteed for 30 years. These low rates will disappear as the economy improves. If the lending reform that many are calling for happens, there is a chance that the 30 year mortgage will also disappear. For more on this point, click here.

4. Realize the Wealthy Are Back in the Market
In 2010, sales of homes under $1 million were down 2.8% from the previous year. Yet, home sales of properties priced over $1 million were up 18.6%. That means that the people who best understand the principle “cost vs. price” best think now is the time to buy real estate.

5. Don’t Forget It’s Still About “Supply and Demand”
There will be a steady supply of buyers purchasing homes this spring. Houses will sell; many houses. Don’t allow this increase in demand to fool you or your homeowners. Home prices will not appreciate on increased demand alone. Price is determined by the ratio between supply and demand. Make sure you know the month’s supply of inventory available for each category of house you have listed. Only then can you give great counsel on pricing.

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We Think We’re Going to Believe Grandpa

There are those currently debating the financial advantages of owning a home. Some are looking at studies and reporting that homeownership has never really been a great investment.

One of these people is Jack C. Francis, a former Federal Reserve economist and professor at Baruch College. He said in a recent CNBC article:

“For generations, parents and grandparents have been telling us that the way to get ahead was to buy a house and keep making payments with a fixed interest rate and after 20 or 30 years it would be way up in value and that was your nest egg in old age. You could either live in it rent free or sell it and use the proceeds to rent an apartment.”

The article goes on to explain the rest of Mr. Francis’ comment:  

That was good advice until 2006 when home prices collapsed, he says, and it “may become good advice 10 years from now, but right now it’s not.”

Mr. Francis bases his conclusions on a study he completed which covered the years 1978 through 2008. In his study it showed that home prices increased annually by 5.7% and that the S&P 500 increased by 10.8%. Based on this information, Mr. Francis gives the following advice:

To students who come to him for guidance on whether to buy or rent in the near term, however, Francis has one word of advice: wait. “I keep telling them this is not the time to buy,” he says.

Let’s take a closer look at this conclusion.

1. We have our own study.

Mr. Francis did a study over a thirty year period which did not include the last 3 years. If we look at the same categories since January 2000 (covering one of the worst decades in American real estate history), we find that home values GAINED 42% while the S&P LOST 4.7%. It all depends on which set of data you choose to use.

2. The proper comparison is rent vs. buy.

All of these comparisons claim that putting your money into a different investment vehicle other than real estate might make sense. What they are not taking into consideration is that the investor will still have a housing expense. They will still need money for shelter. They cannot just take their money for shelter and buy other assets with it. A person can’t live in their 401k or their IRA. This leads us to…

3. In most markets today, owning is LESS expensive than renting.

Trulia recently came out with their Rent vs. Buy Index. The report shows:

 that it is more affordable to buy than to rent a two-bedroom home in 72 percent of America’s 50 largest cities.

For more on this issue including a 50 city breakdown, click here.

4. Current mortgage opportunities may never be available again

The government has driven mortgage interest rates to all time lows. You can still get a 5% rate and guarantee it for 30 years. Both of these opportunities may soon disappear. Mortgage rates will increase as the economy improves and the Fed no longer feels pressure to keep rates low. The 30 year mortgage may soon be a thing of the past if suggested mortgage reforms come to be. You can lock in your housing expense for 30 years if you purchase. Renting is like having an adjustable rate loan with no cap that readjusts EVERY year. Which way do you think a landlord will readjust it?

For more on this, click here.

5. Most Americans see more to homeownership than financial value.

Last week, Fannie Mae released the National Housing Survey. The survey reported:

  • 96% of all homeowners said homeownership has been a positive experience.
  • 84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.
  • 2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).

Bottom Line

There are more and more studies being done on the value of homeownership. We think we will trust in what our parents and grandparents said. Your mortgage payment is money you put into your savings. Your rent payment goes into the garbage.

What’s the Deal with Interest Rates?

It has been an up and down ride for the economy and the North Attleboro real estate market. You remember what it was like. There was the housing boom where home values rose and anyone could get a loan for a new home. Many experts said it would end. Many said it would end badly. Well they were right. In 2010, Americans faced the most foreclosures in history. You may have known someone or maybe it was you. With the econonmy taking a downturn, many people lost their jobs. The loss of a job affects more than just income. Loss of jobs also health care, family life, bills and mortgage. This had a negative impact on the North Attleboro market. We have seen an increase in the number of foreclosures and short sales in the Attelboros.

The current market consists of many foreclosure properties and many homes that are priced to sell. It’s a buyer’s market and interest rates remain low. It’s still a great time to buy. Lower interest rates mean you could qualify for more house than you expected to buy. It also means there are many more houses on the market to choose from. This gives you a great deal more flexibility to find the perfect house.

Take a look at this graph that indicates what the differnece in your interest rate makes on your mortgage payment:

 But this also creates opportunities for sellers. You may not get the same price for your home that you may have gotten two or three years ago, but sellers can also take advantage of the lower interest rates. Now may be the time to move up to a new home. Don’t forget that you can get more house for less money, the inventory of homes is greater and you can be more picky. Your home will sell if you price it right. Don’t go it alone. Find an expert to help you list and market your home. Price it right the first time and it will sell!

I would be happy to help you find a mortgage or with the buying and selling of your home!

Cheryl Walsh
C. Walsh Realty
Ph:  508-695-3500
www.CWalshRealty.com