My Top 10 Reasons Why Renters Should Seriously Consider Buying a Home In today’s Real Estate Market.
75What Happened to the "Buy Low Sell High" Concept
As a twenty plus year veteran in the Mortgage and Real Estate industry, I am still bewildered by the mind set of many renters and future homeowners that will gladly jump into the real estate market when it is on the upswing. Buyers seem to be more than willing to pay more money for a home because ten other people want the same property.
It was not that long ago, when a seller could list their home for sale, and have ten offers on the table before the “For Sale” sign even hit the front yard. Buyers were out-bidding one another by tens of thousands of dollars just so they could be the successful bidder.
Now that prices are down, no one seems to be as enthusiastic. Have we all forgotten the rules to gaining wealth in our society, the “buy low sell high” concept that works for stock, bonds, real estate and many other commodities? So answer this question for me. If real estate prices are the lowest they have been in over five years, mortgage rates are at 5.25% for a 30 year fixed rate loans, and lenders are making it more difficult to qualify for a loan in the future, then why in the heck are people sitting on the fence, waiting, instead of picking up the best real estate deals they can get their hands on.
Maybe I am the crazy one here; however, I do not get it. I know we hear in the media every day, that the real estate market is bad, however, what is really so bad about it? For those of us who purchased our homes a few years ago, well, we paid top dollar! We probably lost some equity in our homes, which in reality is really only air money. Unless you tapped into that equity, and used it to improve your financial situation, it really doesn’t mean anything.
For those people that did not purchase real estate over past three to five years, consider yourselves lucky. You have the opportunity to get a rock bottom deal now that is guaranteed to pay off for you in the up-coming years. For those who purchased a few years ago, you are equally guaranteed to get back most of your investment, if not all of the equity you lost and then some.
So, here are my Top 10 reasons why YOU SHOULD RUN NOT WALK to your mortgage and real estate professional, and say FIND ME MY DREAM HOME!
1. Buy low sell high this is a simple strategy to gaining wealth in America.
2. If you do not own real estate, the person you are really working for is Uncle Sam.; you are missing out on the best tax right off available to you.
3. You can bring home .75 to .90 cents on every dollar you earn buy owning your own home.
4. If you wait another twelve months to buy you may be required to put down as much as twenty percent to purchase your next home,
5. Our current market is very volatile and tightening by the day. The loan you qualify for today may no longer be available tomorrow.
6. You may now be able to afford to live in a neighborhood you would not have been able to qualify for a year ago.
7. You can still purchase a home with zero down payments, and zero closing costs.
8. Interest rates are once again at a 42 year low of 5.25%
9. You can now get more home for your money. What would have been a condominium for you two years ago, can now be a single family home with a yard for your dog.
10. The home you want at the price and payment you are looking for is out there right now waiting for you! You may end up wishing you got off the fence, turned off the news, and went with your own God given instincts to make one of the most powerful decisions of your entire life!
Some of the wealthiest people in the world do not make their decision based on fear, gossip, or conjecture. They make powerful choices and go against the grain. They look at the real picture. Their decisions are often based on common sense, gut instinct, and taking action when opportunity knocks. Will you be among the 2% wealth builders or the 98% who wished they had purchased their home when the market was so good?
Just food for thought!
Remember to Live Life Powerfully,
Colin
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In my opinion, there is never a bad to buy real estate, especially in California, and other parts of the country. Usually when you try and wait till the bottom hits, you are buying on the upswing; ultimately paying more for the property.
Well, let's talk in a couple of years then :) Only time can tell who is right here...
lol , sounds good, I always choose the positive outlook. I works for me. Thanks man. I appeciate your comments.
it's still falling and most economists are saying for another two years at least. in japan when their housing bubble burst, house prices fell for thirteen years running.
houses are still selling at approximately double the cost of what is sustainable by income with a normal down and a fixed rate. I don't think they will half in price most areas, although they should unless income increases, but I think they will fall considerably more and should.
it's a correction. the prices now, even now with what they have already dropped, are unsustainable.
For those who are renting, and making someone else wealthy, they would still be better of with the tax bennefits for owning their own home. Regardless of were values end up, the money saved in taxes alone is well woth it. The median home prices here in California are down over $170,000 form 2006. The average consumer does not have the means to save ten to twenty percent for a down payment that will most likely be needed for futire home financing? Your home was ment to provide shelter for your family, in additon to have a tax write off. Equity is just a perk of homeownership, and should not be the primary forcus for purchasing a home. Lastly, in the year 2000 you could by an average home for $275,000 at 9.5% interest rate, the monthly payment then, was $2,177. the same home at $417,000 today at 5.25% would cost $1,824.00 per month. I think the numbers speak for themselves. Thank you for you comments. Colin
I think the one point you do make well is that renting is growing more expensive too. If a person is buying a home to live in, rather than speculation, over 20 or 30 yr mortgage they won't lose value and might gain.
For those purposes, I think buying a house now, assuming you catch a fairish deal, might be an advantage. Problem is lending is getting tight too. Mortgage rates are falling though, so it's not necessarily a bad time to buy assuming you could get a loan.
Amen Men, Thank you again for your comments :)
In Connecticut the prices are only just beginning to come down...perhaps 5% or so.
This could be good or bad depending on what side of the fence you are sitting on, however, ever region of the country seems to have there advantages and disadvantages. Thank you for your participation.
I guess that means I will be on the losing end in 12 months when we do decide to purchae our first home. It's just not possible at the moment (we're in transition). However, you mentioned that it is getting more difficult to qualify for a loan. Could you tell me what are the key elements to what might qualify or disqualify a person. And could you create Hub for this topic. It would be very helpful for those of us like myself. Thank you. Good topic.
Elleissa, this is an excellent question. The reasons I am stating that it most likely will become more difficult to qualify in the months to come, is simply due to many major banks tightening of credit and down payment requirement. Depending on where you plan to buy, and within what price range, could make a big difference on how easy of difficult it may become. For buyer looking to purchase homes $417,000 and under, which is the current conforming loan limits, still have an excellent chance of qualifying for a new mortgage. There are several option to purchase with low to no down payment requirements.
Fannie Mae, FHA, Freddie Mac, which are the largest investors in the secondary market, are still very committed to assisting future homeowner in reaching their home buying goals. For buyer that will need to purchase homes in the higher price ranges, are the one's that may find it more and more difficult to qualify.
A person looking to buy within the next year or so, should seek out lenders that thorowly understand the guideline set by these large secondary market investers. To increase your possibilities for qualifying for a mortgage, try and put away money for reserves. The automated underwritting system used through FNMA and Freddie Mac, like to see borrowers that have disposible income left over after they close their transaction. Try and keep revoving debts down, and credit score up, lastly, prepair to have a least five percent for a down payment even though you may not need it. Due to the declining real estate markets, some lenders are reducing the 100% financing guideline to 95% to offset this decline in values.I hope this is of some help to you.
Regards,
Colin, you make some good points, especially in the area of taxes and mortgage tightening. I believe that the days of 100% financing programs are soon going to be a thing of the past (until the next boom/greed cycle happens). I don't agree that the market is bottomed yet. We are in for a long trend down I'm afraid. That's statistically speaking anyway. (Read Warren Brussee: The Second Great Depression) Having said that though, I'm a big believer in the long term value of real estate, especially using rentals as a retirement nestegg.
Anyway, nice article.
This is good advice for investing. I believe since real-estate is down, especially in some parts of the country, you can actually get homes for less than half the actual price. However, credit limits and how much banks are willing to lend are still a problem to young investors.
You are correct, however where there is a will, there is a way. Thank you,
"So answer this question for me. If real estate prices are the lowest they have been in over five years, mortgage rates are at 5.25% for a 30 year fixed rate loans, and lenders are making it more difficult to qualify for a loan in the future, then why in the heck are people sitting on the fence, waiting, instead of picking up the best real estate deals they can get their hands on."
We are in that position, renting and waiting to buy, so let me answer why. Land and housing prices might be lower than they have been for a while, but that doesn't mean they won't carry on going down. If you believe there is a further 20% or so to go in falls, buying now would mean you lose equity in your purchase month after month.
Even if prices are static or rising a bit, if you are getting more interest on your deposit than house prices are rising by, it doesn't hurt too much.
People are unsure about their jobs, and futures. It's not a good idea to buy now if you might have to move to another town for work, or get made redundant and struggle to pay the mortgage.
As a mortgage broker and estate agent, you aren't objective, really. You wrote this hub over a year ago, and both house prices and interest rates have fallen since then, in the USA, haven't they?
Although interest rates are low, and will probably remain low for the next few years, I believe that the market has another 30% to fall. There's a huge shadow inventory of distressed homes that haven't been foreclosed on. I think the tax credit if artificially propping up the prices for the time being.
Misha 4 years ago
Man, it's not the low yet. Wait till everybody and their dog will tell you that buying is insane - then buy. It will take a few more years to get there, you know...