Now is the Time to Buy a Home
The current climate of the economy with the bail out expected this week has seen a rise in mortgage interest rates. Rates have been on the rise for weeks, and I expect them to continue to go up. Now is the time to lock in as low a rate as possible, at near historic lows.
Additionally, when the bailout gets going there will not be as much a since of urgency to unload the properties as the banks had. Therefor the attitude of fire sale prices on behalf of the seller will be gone. Remember the government typically moves slowly. Housing prices will not ever be as attractive as they are now.
If you look at the cost of the rise of rates over the length of the entire mortgage it costs more in interest cost to wait. This, coupled with home prices rising, will price home ownership out of reach of many.
Now is the time to find that home and buy it. Your local Real Estate Agent can locate some wonderful properties out there at great prices. Your mortgage company can lock in a 30 year rate on that home and you will feel real smart with those steady payments for the next 30 years.
Watch the News and Lose all Hope
I arrive back today from a 4 day vacation where cell phones and laptops don’t work. Wow, what a different world we left behind when we left to come back.
We came back to a confused state for some people. One person told me the government was failing and withdrew all offers for properties. Another agreed with me that this is the best time there has ever been to buy real estate and wanted to write another offer.
The latter person will be far ahead financially in a few years when things get stabilized and the doomsayers will wonder where they missed out with prices back to normal. Don’t hide your head in the sand, it is time to buy low.
If you listen to news reports, you too will get caught up in the negative frenzy. Rather, look at what the big boys are doing. Warren Buffett and major investor groups are out there buying things on sale. They are taking advantage of this fire sale, and so can you.
Please, if you ever thought about becoming a real estate investor, now is the time. There are deals everywhere, if you just know where to look. Lets all take advantage of these times and secure our financial future thru the power of real estate.
Government Takeover of Foreclosures Cures Economic Ills
The fed is now moving to set up a corporation to take foreclosures from the banks to clear up the banks balance sheets. Lets call it the FRC, the Property Recovery Corporation. I imagine the PRC will buy properties for cents on the dollar to give the banks back some capital. Now, the banks are carrying them with zero value on their books since the loan is non-performing.
There are conservative estimates that there are $500 billion in bad loans the banks have on their books. Based on the lending ratios this means the bank cannot loan 10 to 15 time that amount out in loans to businesses and consumers. Hence the current credit crunch, where there is money everywhere but none to borrow.
Now, say the PRC buys the property from the bank that is the tied to the non performing loan for 40 cents on the dollar loan amount. The bank now has 40 percent of their lending power back on that loan. Do that all across America and the banks will have $200 billion back on their books and can make loans on that amount. The credit crunch somewhat clears up.
The PRC will have a cost of operation to hold and sell of 20 cents on the dollar of their assets, so the breakeven that they would have to sell the properties they take from the banks would be 60 cents on the dollar. This arrangement could actually make money for the fed, by selling above the acquisition, holding and selling costs.
In summary, the banks become more liquid so lending loosens up, and properties are sold more uniformly so the severe downward spikes of property prices would level off.
I’m all for the PRC. It would make a good investment if they sell shares.
How Interest Rates Effect Investing Decisions
For the third week we have seen mortgage at historically low rates. This is a great time to buy rental properties.
When Anne and I were buying rentals we got 30 year fixed rates from 5.5% to 8.5%. Each and every home we bought we are still happy with the financial situation, no matter the rate.
You have to sometimes overcome the concern of the cost of borrowing and look at the opportunity. Does the property cash flow positive? Are you getting instant equity? If either one is yes, then you have a good deal no matter the interest rate.
Don’t let rates drive your decision, let the analysis of the deal make the decision. Regardless, it would be hard to not make a property cash flow positive and give instant equity in the current environment.
The Bottom of the Housing Market
For the past two weeks I have given close friends the advantage of the knowledge of when the housing market would hit bottom. They have used the information to their advantage.
Investors have used the information to capitalize on adding rental properties to their portfolio. With housing inventories high, sellers giving away equity and mortgage rates at historic lows our investors have begun getting into the mood to purchase.
First time home buyers have also seen this as the best opportunity of their lifetimes to get into home owner ship. We have some that took advantage of the soon to be history down payment assistance and the $7,500 interest free government loan in addition to the great buys and great mortgage rates to get into that first home.
These purchasing by smart investors and first time homebuyers are starting to chip away at the high inventory levels on new and resale homes. These actions are the sign of the last of the decline in the home market.
I have called the Bottom of the Housing Market to be November 4. We don’t know how long we will skid along the bottom but we are almost there and be ready for a steady but slow rise over the next few years.
Yes, if you haven’t you guessed it, that is presidential election day and no matter who wins, the media and the world will all be talking about the happy days ahead. Any change will turn the media from the naysayers they have been to painting the rosy picture of change.
Now get out there and buy a house to help this economy and remember you have bought at the bottom of the market.
Boy, I’m Glad I Invested in Real Estate
So the Dow and the S&P tumbled nearly 5% in one day. AIG, Lehman, Merrill, Washington Mutual, all names we grew up with and at some time we invested in, are slowly slipping away as their stock values drop and investors run from them.
Granted I have lost money on a few of my real estate purchases but nowhere so much so quickly as the stock market fell yesterday, and that is he same market that all the investing gurus tell you to get into. That is the same market that the investing gurus told us to get into for the last 15 months since real estate wasn’t safe.
Well let me tell you, my 401k is down to a 201k having lost over 10% since the beginning of the year. I’ll tell me where is not safe to invest now, its stocks.
Ill take real estate any day. The rental properties perform each month with the tenant paying the rent even though the values may have stayed steady or dropped a few percentage points. Atlanta homes have held their value well over the past year and a half.
Boy, I’m glad my bulk of investments are in the safety of real estate. I was able to sleep last night knowing that in the morning the tenants will still be there and paying their rent.
So for all you that tossed all night, think about what the guru said to run from and forget about what they told you to buy. When all is said and done and the stocks are worth nothing, if you had real estate you would still have the house and land to perform.
Mortgage Rates Fall
With the recent government ‘takeover’ as some call it, of Fannie and Freddie there is a renewed assurance that the secondary mortgage market will continue to function and all outstanding loans will continue to be insured. This relief has led to a immediate and significant drop in long term mortgage rates for well qualified buyers.
If you have been standing on the sidelines waiting for a sign to jump into investing in the real estate market this is the sign. Investor loans for well qualified buyers are down to as little as 6% on a 30 year fixes loan according to one lender. There has never been a better time to invest in real estate for passive income, so get going.
Home Inventory Inches Up - No Surprise
I was looking for some statistics on the market and found this informative article from National Association of REALTORS.
As a member, I find that they have several resources and statistics that are helpful when positioning a home for sale or when working with a buyer use to help negotiate the best price for our buyer clients.
Existing-Home Sales Down, Inventory Inches Up
NAR President Richard F. Gaylord says there is something of a quandary in the current market.”A recent online survey of REALTORS® shows nearly a quarter of potential home buyers are waiting on the sidelines,” he says. “However, timing the market can be very tricky, which is why home buyers should always have a long-term view to build wealth.”
Housing Inventory Climbs
Total housing inventory at the end of June rose 0.2 percent to 4.49 million existing homes available for sale, which represents an 11.1.-month supply at the current sales pace, up from a 10.8-month supply in May.
Lawrence Yun, NAR chief economist, says first-time home buyers are critical to the health of the housing market. “About four in 10 homes are purchased by first-time buyers, which frees existing owners to trade up,” Yun says. “With many potential first-time home buyers on the sidelines, a first-time buyer tax credit would have a significant positive impact on both housing and the economy.
Combined with permanent increases to mortgage loan limits and enhancing the FHA loan program, the housing stimulus package working its way through Congress would go a long way toward helping consumers and boosting the overall economy.”
The national median existing-home price for all housing types was $215,100 in June, down 6.1 percent from a year ago when the median was $229,000.
Yun says there is a downward distortion in the price data. “With short sales and foreclosures accounting for approximately one-third of transactions, it’s hard to make an apples-to-apples comparison with a year ago when they were only a minor portion of the market,” he said.
Despite the overall sales decline, unpublished snapshot data shows existing-home sales rising significantly from a year ago in Bakersfield, Calif.; Fort Myers, Fla.; and Las Vegas.
“Sales are now beginning to pick up in Orlando, Fla., Phoenix, and Oakland, Calif.,” Yun sys. “Interestingly, sales fell in Atlanta, Houston, and Kansas City, Mo., despite affordable home prices and solid local employment conditions.”
Mortgage Rates Rise
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 6.32 percent in June from 6.04 percent in May; the rate was 6.66 percent in June 2007.
Single-family home sales declined 3.2 percent to a seasonally adjusted annual rate of 4.27 million in June from 4.41 million in May, and are 14.8 percent below the 5.01 million-unit pace in June 2007. The median existing single-family home price was $213,800 in June, which is down 6.7 percent from a year ago.
Existing condominium and co-op sales rose 1.7 percent to a seasonally adjusted annual rate of 590,000 units in June from 580,000 in May, but are 19.7 percent below the 735,000-unit level a year ago. The median existing condo price4 was $224,200 in June, which is 2.2 percent lower than June 2007.
Sales Up in the West
West: Regionally, existing-home sales in the West rose 1.0 percent in June to a pace of 1.03 million but are 6.4 percent lower than a year ago. The median price in the West was $288,400, which is 17.2 percent below June 2007.
South: In the South, existing-home sales fell 3.1 percent to an annual rate of 1.85 million in June, and are 18.1 percent below June 2007. The median price in the South was $185,300, down 2.4 percent from a year ago.
Midwest: Existing-home sales in the Midwest declined 3.4 percent to an annual pace of 1.12 million in June, and are 17.6 percent below a year ago. The median price in the Midwest was $175,300, up 2.8 percent from June 2007.
Northeast: In the Northeast, existing-home sales fell 6.6 percent to an annual rate of 850,000 in June, and are 15.8 percent below June 2007. The median price in the Northeast was $256,700, down 12.6 percent from June 2007.
Reprinted from REALTOR® Magazine [July, 2008] with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.
Good News for Atlanta
WOW! It is so great to hear some good news! I found this article and thought you might enjoy it as well. Sorry, I don’t remember exactly where I saw it.
Keep Investing,
Mark
Atlanta Real Estate Market Thrives
Despite a general slowdown of the national economy, commercial construction remains strong in Atlanta. Total construction costs for commercial and multifamily projects permitted last year in Atlanta rose by more than 50% over 2006 figures.
One component of commercial construction is especially booming in Atlanta. The construction of new hotels is proceeding at a pace not seen in Atlanta since the run up to the Olympics. Driven by a growing hospitality sector and an increasing market for luxury condominium residences, 10 hotels are either under construction or in a pre-development phase in the city of Atlanta, including two W Hotels and the first Baccarat Hotel in the continental U.S.
The Hilton Garden Inn opened to guests in March just across from Centennial Olympic Park. Buckhead welcomed a new ultra-luxury hotel, the Mansion on Peachtree, in May. Condominiums at the Mansion on Peachtree start at the $3 million mark.
The commercial real estate market is also benefiting from a growing demand for office space in Atlanta’s urban core. According to the CoStar Group, net absorption for the city’s central business district has been positive for four quarters in a row, outpacing the performance of the suburban markets, which have declined since the fourth quarter of 2007. This has put the overall vacancy rate for the central business district within 0.4% of the suburban markets. More than 4 million square feet of office space is currently under construction in the city of Atlanta to help meet this rising demand.
Allen Plaza is one example of new development taking place in Atlanta. At its completion, Allen Plaza will include more than two million square feet of Class A office space. Two office towers have already been occupied: 55 Allen Plaza, anchored by Ernst and Young’s Atlanta office, and 30 Allen Plaza, the new headquarters for Southern Company. Additional projects at Allen Plaza include two hotels, a 450-unit Post Properties residential tower and upscale retail and restaurant space.