Weekly GungHo Real Estate E-Zine
January 26, 2010
In this Issue:
Walter’s World: Jacksonville NC Renters, You Should Be Buying!
Analysis: Good and bad signs in December housing report
Featured Article: A lesson about timing
Recommended Resources: Really? A 740 credit score?
Jacksonville NC Renters, You Should Be Buying!
Just finished a closing with a buyer today, where he purchased a home in a Jacksonville NC neighborhood and had less than $500 into the purchase and his first mortgage payment is not due until March 1st.
If he had tried to rent the same house, he would have to pay $850 for security deposit, partial month’s rent of about $170 plus first month’s rent of $850 starting February 1st plus $150 non-refundable pet fee per pet. Total upfront to rent: $1700 to $2000.
And we are not even considering the $8,000 tax credit, tax deductible mortgage interest and real estate taxes, appreciation in home value, living in your own place, being able to decorate as you please, and fixed mortgage payment of principal and interest.
Then, why do people rent instead of buy? Most of the time they do not know the facts – it is financially better for you to buy over the long run as we just showed. Here in Jacksonville NC, being a military market, there are 3 main reasons I hear and this is what my reply is:
1) The uncertainty of how long am I going to be stationed here – if you know you will be here at least 2 years, then it is better to buy
2) Am I going to re-enlist? – This is one I can’t help you with, but once you make that decision, then we can talk about buying a home
3) I think my credit is not good enough – I have several mortgage lenders that will work with you and provide a FREE Pre-Approval – it only takes about 15 minutes on the phone or in their office.
To learn more about the Home Buying Process, you can receive your own FREE e-book called “8 Steps to Home Ownership”. This e-book takes the confusion out of the home buying process.
Good and Bad Signs in December Housing Report
Maybe you’ve seen by now the statistics for nationwide home sales in December, released by the National Association of Realtors.
The grim-sounding data show that home sales dropped almost 17 percent in December from November. It represents the largest monthly decrease in 40 years, according to the Associated Press.
Of course, a great deal of the decrease can be attributed to the extension of the first-time home buyer tax credit. November’s sales were boosted by a number of first-time buyers scrambling to get the credit, for which they originally had to close by the end of the month.
Once the credit was extended, the emergency was off. Buyers now had time, which was bound to lead to a decrease in December sales. The situation does leave a couple of questions, however, regarding the overall housing market:
1. Are most of the first-time home buyers now out of the market, having already purchased their home?
2. What’s going to happen to the market when the government’s tax credit enticements – now pushed to “move-up” buyers, too – expire at the end of April?
These certainly are big question marks hovering over the market. However, December’s data also shows some signs of further stability:
The NAR stats show that while the volume of sales dropped, the median price of single-family homes rose for the month of December, about 1.5 percent from the year before. This marked the first month since August of 2007 that saw a year-over-year increase in prices.
The other sign of stability is in the existing inventory of unsold homes, which fell about 7 percent. That, the NAR is reporting, is now at about a 7.2-month supply. A six-month supply is considered healthy, and the market is creeping toward that number.
With the tax credits set to expire this spring; mortgage rates likely to rise around the same time; and a consistently shrinking inventory of homes on the market, sales could take a big jump. That leaves the possibility that home buyers will have to be ready to move fast this spring when they find a home or investment property that suits them.
Keep in mind that this time of year is traditionally a good time to buy, as winter often means fewer buyers and therefore more flexible sellers.
A Lesson about Timing
You always hear about trying to time the market’s bottom when it comes to buying a property.
You’ve heard the phrase "buy when there’s blood on the street" and probably have taken note of expert investor Warren Buffet’s advice, "Be greedy when everyone else is fearful, and fearful when everyone else is greedy."
Those lessons are being taken advantage of by real estate investors in today’s real estate market, as distressed properties are available at bargain prices and have made up a large percentage of real estate sales in the past year.
There’s another lesson in today’s news, however, about the flip side of that equation: selling at the top of the market, being fearful when others are greedy.
The lesson is about MetLife Inc. According to an Associated Press article, Metlife sold a pair of giant apartment complexes in New York in 2006, near the height of the real estate boom. It was a record sale — $5.4 billion for 110 buildings and 11,000 apartments overlooking the East River.
Things were going great at the time, with real estate prices in New York (and just about everywhere else) soaring. Instead of holding on to the property, which had been built by MetLife in the 1940s when there was a demand for housing for returning World War II veterans, and seeing what additional appreciation it might bring, though, MetLife sold. It might not have been fearful, but it was at least a cautious move at a time when everyone else was greedy.
The buyers of the property at the time had big plans. They were going to convert some of the rent-controlled units to luxury apartments and capitalize on the huge demand for high-priced digs at the time. However, as the real estate market deteriorated, the investors ran into problems.
A state court ruled that some of the rent increases were improper, according to the AP article. The value of the property, analysts pointed out, dropped to $2 billion, less than what the more than $4 billion owed on the property. The article states that now, facing bankruptcy, the investors will turn the property over to their lenders.
On the surface, the bankruptcy and forfeiture of the properties to lenders make it look like a poor investment for the group who purchased the apartment complexes in 2006. But the real lesson is how good MetLife’s investment was.
It built the properties into the demand of World War II veterans. It held the properties for 60 years, enjoying the cash flow and — you can bet — paying down debt while the properties appreciated. And when others were greedy, it sold them near the height of the market.
How many similar stories will there be to come out of this current market, when investors are buying low and into the demand for affordable housing?
This story is a great example of knowing when to buy. And when to sell, which is one we don’t always see.
Really? A 740 Credit Score?
It used to be that if you had a credit score of 720, you were in on the best financing rates, prices, etc. of the credit world. Now, some are reporting, you need to have a 740 in this age of tightened credit. To learn why and how to get there, visit this informative and interesting article/tip list at MSN.com:
Have a great week!
Keller Williams Realty
(910) 340-5524 Direct