By Rich Levin
It’s an election year. Have you noticed? Rumor has it that if Obama wins one set of things will happen and if Romney wins a different set of things will happen. Either way, it feels like things will change. Let’s all hope for the better. Although for home Buyers it won’t get any better than it is right now. For home Sellers better means that they will get more for their homes. This is good for Sellers. Better means that interest rates will rise. This is good for the mortgage lenders. But for the Buyers soft prices and low rates, the signs of this struggling economy make this the best time to buy.
And Buyers know it. They are out in the market. Houses are selling faster although not necessarily for more money. In some price ranges Buyers are competing for houses; bidding prices higher. In the next price range, just $10,000 or $20,000 higher or lower houses are languishing on the market with little activity.
“This is the type of Real Estate market that two years from now everybody is going to say, “I wish I had bought then.”
Financing
Interest rates are remaining around or below 4% on residential mortgage loans. Mortgage money is available with five percent down or less. The Buyers do need to have steady employment, and a reasonable credit rating. The days of Buyers needing to prove employment, have some cash on hand and credit worthiness have returned.
Requiring stability of employment, credit and some cash is not the banks being cautious. It is the way lenders have made decisions since paper money was invented. Bottom line, solid Buyers can get the best rates and buy at what I believe is at or near the bottom of the market.
Inventory, Foreclosures & Pricing
Foreclosure properties are being purchased at a much higher rate as first time home Buyers and investors in market after market are deciding that we are near enough to bottom.
This Buyer and investor activity will create its own momentum. As more Buyers and investors choose to buy the demand they create will stabilize and lead to market appreciation.
As Real Estate Agents you need to decide if you are comfortable recommending that this is the time for Buyers to buy, that prices may be at or near the bottom. I suggest that we are at or near the bottom and the Buyers you encourage to buy over the next few months will be forever grateful for your advice.
Some Considerations
The Real Estate market, specifically for residential homes is typically not a speculative market. The vast majority of people buy a house to live in it as their home, not to resell it for a profit. Over the last forty years Buyers have come to expect that their home will build equity and appreciate in value. But, the decision to buy is usually based on factors other than anticipated appreciation. Buyers want to own the space in which they live. The fact that this is a fabulous time to make that decision just makes the decision easier.
There is a continuous demand in most markets. People graduate from school, get better jobs, get married and divorced, have children, upgrade and downsize, among dozens of other reasons that new Buyers come on the market. These life events keep occurring. However over the past few years many Buyers have paused. They still want to buy but they are waiting. Historically when there is a time that Buyers are reluctant to buy for any reason this creates a pent up demand.
As Buyers realize that it is a good time to buy but not necessarily for Sellers to sell; demand will begin to absorb and exceed supply. Over the next year or two the additional demand is likely to lead to a Seller’s market. Because of the severity and magnitude of the current housing supply this turn to a Seller’s market will likely be gradual.
Inflation: The X Factor
I remember a rapidly inflationary period. I remember it for a funny reason. I used to drink a lot of Coca Cola. One day when I put a quarter into the machine to vend my Coke I realized that it was going to cost me forty cents. Soon after that it was fifty cents and within five years it was seventy five cents. Now it is at least a dollar. This is inflation. Your money buys less and the cost of what you buy increases.
If you owned Real Estate during this same period you were very happy because the property you owned in 1981 also doubled in price or more by 1986. That is true even if you didn’t live in a highly populated area. This inflationary period did not discriminate by locale.
Are we on the verge of another inflationary surge? I don’t know. I have been reading what I can find on this and it seems to be a largely ignored topic. The people in our government and financial institutions openly talk about having little control. I think about the trillions of dollars worldwide being spent on bailouts. The definition of inflation is when the amount of money in circulation increases and the available goods decreases. It seems to me that is what is happening.
If inflation does devalue our money then house prices, along with the price of almost all other hard goods will increase and this year’s Buyers are going to get benefit tremendously.
First Time Buyers and Investors
FIRST TIME BUYERS THIS IS YOUR TIME!
Another group that I am encouraging to buy now is investors of residential rental property. Investors still have to do their investment analysis. They still have to carefully look at occupancy and vacancy rates. In other words, investors have to make smart, calculated buying decisions. This is always the case.
The reason it is a good time for these investors is because the market is soft. Rents are increasing, often by large amounts. As long as there has not been a population exodus in your community, that is, as long as people are choosing to live in your community and employment is stable, the rental property is going to sustain value. At the same time market conditions right now, with more challenging underwriting standards and only those who really need to sell putting their property on the market creates the opportunity all investors are looking for, buy low, particularly those with cash.
Get in the Game
One of my sons just closed on a new home for his family. My other son is getting his Real Estate license because he is seeing so many people around him buying. My Clients are Real Estate Agents all over the country that I coach and teach. Selling multi-million dollar homes in Long Island, Southern California, half-Million dollar homes in thousands of places or sixty thousand dollar homes in rural and urban areas Real Estate Agent are busier than they have been in years. The market is changing. It will not be this good for Buyers forever. Take advantage now, in six months, all bets are off.
Rich Levin is a Real Estate Coach with Clients across North America. For information contact Rich at 585-244-2700 or rich@richlevin.com. Website: www.RichLevin.com