advertisement
advertisement

Five Reasons Why Now Is The Time To Buy A Home

Special occasions occur in life at various times, and when they are acted upon in a timely manner, they can change our destiny. I believe now is one of those times. The “perfect storm” of economic events and global opinion has created a small window of opportunity for us regular people to take advantage of something normally only available to the financially advantaged.

Special occasions occur in life at various times, and when they are acted upon in a timely manner, they can change our destiny. I believe now is one of those times. The “perfect storm” of economic events and global opinion has created a small window of opportunity for us regular people to take advantage of something normally only available to the financially advantaged.

advertisement

Five Reasons Why Now Is The Time To Buy A Home

With everybody apparently declaring the
great depression in housing underway, I have to report the contrary
point of view. There are many things that are making this market look
poised for a historic change and I think you might agree with me once
you consider these five reasons why now is the time to buy a home.

1. Interest Rates Are Still Near Historical Lows

Interest rates have been low for so
long that people believe that these are normal rates. This is Wrong.
Today’s rates are low and will ABSOLUTELY rise in the future. With most of us more concerned about our monthly mortgage payment than we are about the cost of the home, interest rates are critical!

If you study the history of mortgage
rates, you will see a cycle. Just as in any market, the money markets
see the ups and the downs. But I think that we are in a period of time
that is about to see extraordinary cycle adjustment (meaning rates
rising very fast, very soon) for several reasons.

  • The U.S. Dollar is weak and the Fed needs to make it stronger. Soon. Like maybe after an election…
  • When the Fed raises its rates, the mortgage markets will follow this time
  • The mortgage market is in a mess. Fannie Mae and Freddie Mac have
    been given more rope, but ultimately the mortgage industry is going to
    tighten lending requirements and will raise margins to sustain profits.
  • When all markets try to correct, they unfailingly “over correct.”
    Think about it, we have seen a cycle of low interest rates for a very
    long time. How will the market correct this? You have to consider that
    the market is due for a very long cycle of high interest rates!

2. Prices Are Down Below Cost

The most important valuation factor in housing values (like any other commodity) is market opinion. The value of a home is based upon what somebody is willing to pay for it today, regardless of what it cost to produce that home.

However, the market generally seeks a value that is close to “cost.”

  • If homes are selling for amounts greater than cost, then market
    suppliers bring more homes to the market to take advantage of the
    profit that exists.
  • If homes are selling at or below cost, then market suppliers are no
    longer motivated to bring more homes to the market until the profit
    returns to the market.

We are now seeing homes that are on the
market for sale, for prices that cannot be replicated ever again. We
would need to see a collapse of the local economy and wages reduced by
significant margins before we could produce homes at the prices being
found in our market today. While this is not true for the highest price
ranges, it definitely is true at and above the median price point (and
certainly below the median price point).

advertisement

3. Short Sale Opportunities Are Booming

This is one element of the opportunity
window that many home buyers do not understand. While the purpose of
this article is to discuss the opportunity (not to explain the short sale process
like we have done in other articles), the key here is to understand why
short sales are such great opportunities for buyers that can make a
quick decision and then have the patience to go through a long closing
cycle.

  • Short sales
    give patient buyers huge opportunities due to the indifference of many
    sellers in a short sale position. They have to get rid of their home
    and they will not receive any money at closing. Don’t you think they’ll
    sign just about any offer (there’s nothing in it for them either way,
    right?)?
  • The lack of coordination of the banks is staggering right now. With
    so many loans in default, they cannot handle the scores of loans they
    are trying to resolve. A patient buyer who makes a wise offer can get a
    home that will be an instant asset.

4. Tallahassee Is Growing – Ultimately We Need More Homes

I have read reports that say
Tallahassee has grown twice as fast in 2008 than we normally do. So
what does this mean? It means that whether that growth is people
renting homes in Tallahassee or people buying homes in Tallahassee,
more housing will be needed. If we build homes at a slower rate than
our growth, I believe it is natural to assume that we will have, at
some point, a shortage of homes. This is all part of the natural
housing cycle, supply and demand. Think how smart you’ll feel in ten
years when you own a home in-town in Tallahassee, and other people
have to drive thirty miles to find a home that a typical family can
afford.

5. The Media And The Experts Are Now All Negative On Housing

All the wisest investors in history
have always been contrarians. If everybody is saying you need to buy,
they sell. If everybody is saying you need to sell, they buy. If the
markets are mixed, the keep their hands in their pockets and only take
advantage of special opportunities.

In 2008, we have seen everybody jump on
board the panic train. Prices have plummeted below cost in many cases
and inventory levels make it a ripe time for buyers to pick out a
special house to hold on to for many years. Are you going to be a
lemming and follow the tail of the herd or are you going to seize the
day (Carpe Diem for Mrs. Hall, my high school Latin Teacher)?

Home Ownership In America Is Still Near An All-time High

More Americans own their homes today than ever before (plus or minus
the last two years). I think this is going to change. More people are
going to be forced to rent due to the increased tightening of the
mortgage markets. Rents will rise dramatically in the future due to
increased demand for rental properties as well as increased costs of
money, sticks, bricks, and labor. Nobody is going to be able to live
cheap (except those who are wise enough to buy today and lock into low
interest rates).

So, what does the prudent buyer do right now?

advertisement
  • Consult with a successful, intelligent, blogging real estate broker
  • Consult with a successful, intelligent, blogging mortgage broker to determine capabilities
  • Review all options with real estate broker and identify potential windfall opportunities in the market
  • Subscribe to the Tallahassee Real Estate Blog to stay abreast of more sage wisdom

As a reminder for those who subscribe to the Tallahassee Real Estate Blog
by email, some embedded pictures and videos might not be appearing in
your email and you might need to click the title header to go to your
browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed, or you can Subscribe with Bloglines . You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa
is a real estate investor and the Broker and Co-Owner of Century 21
First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

 

 

advertisement

View Joe Manausa's profile on LinkedIn