Friday, September 28, 2007
Sunday, September 23, 2007
If you are trying to "time the market" so that you "buy at the right time,"... NOW is "the time to pounce." Come on... Let's dump the shack and score the mansion. This may be the best "Move Up" market in history.
They say that timing is everything... and that may or may not be true. Yet, if you fancy yourself as somewhat savvy about real estate, you know how frustrating this can be. It's no secret that in most parts of the US, it's a "buyer's market." Not just a "buyer's market," but a "BUYER'S MARKET." Definitely not a lot of fun if you're a seller. So Alan Greenspan goes on all the talk shows this past week to hawk his new book, "The Age of Turbulence," http://www.amazon.com/exec/obidos/ASIN/1594201315/interactiveda832-20 , and says what we already knew: Prices will drop more before they rebound. And... interest rates must rise to prevent rampant inflation. Tricky stuff, this macroeconomics...
Here are the main scenarios: 1. Buy an investment house. I'll give this only a "B-" right now. Prices are great and interest rates are great, BUT what do you do with it? Rent it, you say? Well, sure, except that the rental market is presently saturated with every "buy and flip" house that got caught in the downturn. To buy and hold and absorb the mortgage may negate the price and interest rate benefits... AND it may take some time to actually see some equity. (On the other hand, maybe we'll see a big increase in the number of renters, as foreclosures continue to soar? I'm sorry - bad joke)
2. Buy a second or vacation home. This gets an "A." If you've got the extra bucks, it's the right time. If it's for your family's use... and you don't want or need it to produce income, all will be well. Property on or near the ocean in Flagler Beach, Intracoastal, and Salt Water Canals in Palm Coast... are now at amazing prices. Even the slightly higher rates and down payments charged to investors are inviting. I know I'll sound like a dinosaur here, but get this: When I was a new agent in 1986 (pre-laptop days, for sure) they gave us plastic "mortgage calculator wheels" to help us estimate payments. The only mortgage rates around the outside of the wheel were "10% to 20%." Wow... I'm still aghast when I recall that I paid 16.75% for a VA mortgage in 1981. The seller had to pay 5 "points" on this loan for me. A little different, don't you think? I was freshly assigned at the Pentagon, following my tour of duty in Berlin. Yes, there were still two Germanys and The Wall was still standing.
3. "Move up" (sell your 1600 ft., $200,000 house and buy the 3,000 ft. house on the water for $600,000). This gets an "A +." The timing couldn't be better. Remember, as you're "giving your house away," the other guy (the one you buy) is "giving his away," too. The beauty here is that on a percentage basis, you really make out. Same goes for when the market turns around. Because of the price differential, you'll enjoy a terrific "net gain on equity." And, of course, interest rates are really, really low now.
Now here's what I believe. The market will wallow around for about a year, before it turns the corner. But when it does, interest rates will start to creep up with it. This will actually fuel recovery. When folks see 8% and 9%, they will scurry to get on the train before it leaves the station. Question: Will you make your move now... or wait till then?