Real Estate - Is Now The Time To Buy?
The Dynamic Wealth Report
August 3, 2009
Is Now The Time To Buy Real Estate?
Many of you are following my saga of buying a new home. You read along
as Linda and I looked at house after house. We’d find one only to get
outbid by other buyers. Finally after several months, we found ourselves
in the catbird seat on our dream home (after yet another bidding war).
The roller coaster continued. Squeezing a mortgage from a bank was like
getting blood from a stone. Despite stellar credit and a sizeable down
payment, finding a willing lender proved difficult.
Isn’t it a crime that these banks are getting billions in taxpayer
dollars and are unwilling to lend?
A top notch mortgage broker proved invaluable in securing our financing.
After purchasing the property, renovations began.
Renovations brought another set of problems and experiences.
Plumbing installed wrong; Painters not paying attention to the job at
hand; A small fire (which was quickly put out); Problems with noxious
chemicals for the floors; And a water heater leaking two days after starting
repairs.
We were pleasantly surprised by a few things…
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For example, the extra insulation the house contained (which is key during a hot
summer). And the surprise visit of our local bull snake (we named him
Oliver). He slithered through an open door and right into the living
room.
Our neighbors are friendly but mostly keep to themselves… and the horses
love their new barn and turnout.
Despite all the difficulty and problems, we couldn’t be happier in our
new home.
This leads to a big question… Is now the time to buy real estate as an
investment?
Buying a house to live in is one thing… buying for investment is
another.
We all know the background of the housing industry.
The housing industry across the country has been decimated. A few years
ago, the Federal Reserve started raising interest rates. Mortgage rates
moved higher and sub-prime borrowers with adjustable rate mortgages
found themselves in hot water.
The increase in payment was too much to handle.
With mortgage delinquencies moving higher, banks started tightening
lending standards. Loans became harder to get. The pool of eligible
buyers shrank dramatically.
Fewer buyers and tightening credit crushed demand and home prices
started falling.
The vicious cycle accelerated. With fewer and fewer buyers, home prices
had to fall. Add to the cycle a weakening global economy and a falling
stock market, and we’ve got a real ugly mess.
So, is now the time to buy?
Let’s look at some recent data. Home prices moved up last month,
according to the Case-Shiller Housing Index, which tracks home prices in
20 key cities (including Phoenix). For the first time in three years,
home
prices actually increased.
According to the data, 13 of the cities recorded higher prices, and two
(Charlotte and San Diego were flat). Could the housing downturn be over?
Let’s look at some other data…
New housing starts are up for the month of June.
Home builder sentiment is up (confidence is returning).
Mortgage rates are near 50 year lows.
The Federal Government’s giving first time homebuyers an $8,000 tax
credit.
Individually, these are all great signs of life in the homebuilding
industry. Taken together, it’s a clear sign the industry’s on the
upswing.
In my mind, it means now’s the time to be buying. If you have a long
term outlook, the cash and/or the ability to borrow… consider picking up
a few rental houses. With today’s depressed prices, everything you buy
should be cash flow positive.
Trust me. In five years, you’ll look back and kick yourself for not
buying more.
• Gambling Industry (Up 22%)
This month, gambling stocks have jumped to a new level. With the
recession moderating, we’re seeing a return of the family vacation… and
casinos are sure to benefit. The industry’s being lead higher by
companies like Wynn Resorts, IGT, and Las Vegas Sands.
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