Usually it is either a good time to buy or a good time to sell, but not both. If prices are moving up, that is the time to buy. If prices have peaked and will be moving down, that is the time to sell. But this market is one of the few times it will be a good time to do both. I have already covered "The Top 10 Reasons to Buy in 2011", so here is my list for sellers:
1) Plenty of excited buyers
As my previous blog noted, buyers are in the market and looking to buy. Almost 1/2 of the buyers in the marketplace are first time buyers, (the first time of anything is generally exciting, but sometimes awkward). Buyers feel prices are way off the peak, rates are low (see #2), and there are a lot of homes to choose from. If your home is priced right, shows well, and is marketed properly, you will have buyers interested in purchasing it.
2) Rates are at all time lows.
What does that matter to a seller? Well, low rates mean lower payments, and allow a buyer to pay more money for your home. More importantly, what comes down inevitably goes back up, and when that happens, prices may move in the opposite direction. A few years ago 7% didn't look that bad, but after buyers have acclimated to 4%, an interest rate of 6% will look downright outrageous.
3) It won't get much better in 2012.
Sorry, but there simply won't be a quick bounce back in the market. Since all loans are underwritten (indirectly) and purchased (directly) by the government, there won't be a stampede of unqualified buyers in the marketplace like 2001. Rates may rise, government cuts are on the horizon (as of this writing, the federal government had a 1 trillion deficit and California had a 25 billion shortage) and it may be years to go through the mortgage defaults. Few analysts feel the housing market in 2012 will be materially better than 2011, and we are always one catastrophe (e.g., major earthquake) from a hiccup in the market.
4) Banks are encouraging short sales
18 months ago I advised any and all buyers to avoid pursuing short sales because they were anything but short. Less than 25% of short sales actually came to terms and closed escrow, even after months of negotiating torture. Banks have finally staffed up, trained that staff, and have the systems in place to process, approve and close short sales. If you are a seller who owes more on your home than it it worth, there is real hope for a solution via a short sale.
5) It may be time to move UP.
Your home may be worth now than when you bought it, or it is certainly worth less than it was in the Summer of 2006. So what? So is the home you may want to purchase. You can add on to your home, but the cost to do that hasn't move to much lower than at the peak. You may over-improve your property, or if you do add on, it just won't "flow" properly. This may be the time to sell your home at a market price and buy your dream home at a severe discount. People dump stock all the time to buy one that will perform better. If your family has grown, or your needs have changed, and you can qualify for the financing, this may be the time to lock in your home of the future.
Stay tuned for reasons 6-10.
Friday, November 12, 2010
Thursday, November 4, 2010
Top 10 Reasons to Buy (6 - 10)
I continue with this post and now present reasons 6 thorugh 10 on why (and I really mean it) it is a great time buy real estate now, and throughout 2011:
6) Lender are lending (to qualified buyers)
What does 600 billion to 1 trillion buy you? Lower rates. It appears as though rates for 30-year mortgages will stay in the low 4's and may even drop to the mid 3's. Wow. The US will be buying its own debt in order to keep rates low. When people refinance and save on their monthly payment they have a tendency to transfer those savings to consumer goods and not the retirement plan which is good for the economy. Lenders are lending and with such low rates, they are starting to offer Quick Qualfiers (stated income) with large down payments and low down programs. If you have income, or a large down payment there is a lender for you.
7) Realistic and negotiable sellers.
There was a time when sellers thought they determined the sales price: comparable sales and market trends be damned. Now sellers can't ignore the REO down the street and buyers are too savvy to accept any price demanded by the sellers. Technology and transparancy has caught up with sellers looking for that one buyer who is blind to the marketplace. Depending on the cirmcumstance and motivation, sellers are willing to flex on price in order to close as agreed.
8) Real Estate still offers great tax breaks.
There is a saying that when it is cheaper to buy than it is to rent, buy. Barring the unforseen, and the politically dangerous, the major components of the monthly house payment will continue to be a write-off on your tax returns: mortgage interest and property taxes. For example, I am selling a lovely home for $400,000 that I could have leased for $2,000. With 5% down, at current rates, the total monthly payment is $2,686. But with the standard deductions at typical incomes, the net payment is $1,900...which is $100 less than the rental payment.
9) Your second home is within reach.
They have done studies (I assume agents who sell real estate in vacation areas) and found that the single greatest source of pride for a purchase is a second home. Although I personally don't own a second home, I can understand why: these people have already started their retirement prior to retirement. Rather than waiting to enjoy the mountains, beach or islands, start the experience sooner and immerse yourself in the lifestyle earlier. Bad markets hit the second home market hardest and prices in these areas is as much as 50% lower than the peak.
10) Add a rental property to your portfolio.
Few dispute that in the long term real estate will be a good investment. At these prices, with these rates, and with more potential tenants (you must now qualify for a loan and show income), you can find properties and units where th tenant will make the entire payment for you. There are dependable property management companies (may I suggest Progressive Property Management, my company?) that will take care of the all "ills" of rental properties: tenant interaction, maintenance, tenant acquisition. All you have to do is find a property with the right cash flows, use the tax benefit, raise rents when you can, and wait for appreciation.
There they are, the Top 10 Reasons to Buy in 2011. But if it is a good time to buy, then it can't be a good time to sell as well. It would seem they are mutually exclusive? But they aren't. Next week watch for my post, "The Top 10 Reasons to Sell in 2011".
6) Lender are lending (to qualified buyers)
What does 600 billion to 1 trillion buy you? Lower rates. It appears as though rates for 30-year mortgages will stay in the low 4's and may even drop to the mid 3's. Wow. The US will be buying its own debt in order to keep rates low. When people refinance and save on their monthly payment they have a tendency to transfer those savings to consumer goods and not the retirement plan which is good for the economy. Lenders are lending and with such low rates, they are starting to offer Quick Qualfiers (stated income) with large down payments and low down programs. If you have income, or a large down payment there is a lender for you.
7) Realistic and negotiable sellers.
There was a time when sellers thought they determined the sales price: comparable sales and market trends be damned. Now sellers can't ignore the REO down the street and buyers are too savvy to accept any price demanded by the sellers. Technology and transparancy has caught up with sellers looking for that one buyer who is blind to the marketplace. Depending on the cirmcumstance and motivation, sellers are willing to flex on price in order to close as agreed.
8) Real Estate still offers great tax breaks.
There is a saying that when it is cheaper to buy than it is to rent, buy. Barring the unforseen, and the politically dangerous, the major components of the monthly house payment will continue to be a write-off on your tax returns: mortgage interest and property taxes. For example, I am selling a lovely home for $400,000 that I could have leased for $2,000. With 5% down, at current rates, the total monthly payment is $2,686. But with the standard deductions at typical incomes, the net payment is $1,900...which is $100 less than the rental payment.
9) Your second home is within reach.
They have done studies (I assume agents who sell real estate in vacation areas) and found that the single greatest source of pride for a purchase is a second home. Although I personally don't own a second home, I can understand why: these people have already started their retirement prior to retirement. Rather than waiting to enjoy the mountains, beach or islands, start the experience sooner and immerse yourself in the lifestyle earlier. Bad markets hit the second home market hardest and prices in these areas is as much as 50% lower than the peak.
10) Add a rental property to your portfolio.
Few dispute that in the long term real estate will be a good investment. At these prices, with these rates, and with more potential tenants (you must now qualify for a loan and show income), you can find properties and units where th tenant will make the entire payment for you. There are dependable property management companies (may I suggest Progressive Property Management, my company?) that will take care of the all "ills" of rental properties: tenant interaction, maintenance, tenant acquisition. All you have to do is find a property with the right cash flows, use the tax benefit, raise rents when you can, and wait for appreciation.
There they are, the Top 10 Reasons to Buy in 2011. But if it is a good time to buy, then it can't be a good time to sell as well. It would seem they are mutually exclusive? But they aren't. Next week watch for my post, "The Top 10 Reasons to Sell in 2011".
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