Hold on to Your Hat!
With the recent cuts in the interest rates by the Federal Reserve, low real estate prices, and loads of choices, we expect the number of real estate transactions to dramatically increase from the previous 2 years.
Prior to the rate increase, increased buyer activity has already evidenced itself and has since October of last year. Agents are seeing multiple offers on properties again. These properties, of course, are viewed as bargains by the buyers, who see real value in the real estate purchase.
Not only homebuyers are purchasing homes. Investors in real estate are back as well. Many properties are being purchased for the express reason to rent them to tenant who cannot or do not intend to purchase real estate. Most of the investors I speak with are those who see the bottom of the market either being very close or already occurred.
As a purchaser of real estate, you need to assess the reason for your purchase. If you are buying for your primary residence, whether the bottom of the market is near or not, is not important. What are important are these two facts:
1) You like the home
2) You can afford it.
The investment aspect will only become evident after you have lived in the home for some time. Out general rule of thumb is, if you intend to live in the home for 5 years or more, purchasing makes sense. If not, renting may be a better solution. The reason for this is simple. The transaction costs of purchasing a home are not insignificant. To recover those costs, only time will help. Renting will cost less over the short term, as a rule. If you plan to live in the home for a long time, then buying is the way to go. The savings you will get from mortgage interest deduction, along with the potential for appreciation of the property’s value over time give the homeowner a real investment opportunity, but more importantly gives them a home to live in.
Investing in real estate requires good analysis of the costs and the potential income, modified by interest rates, inflation, and price appreciation potential of the property you wish to acquire. Successful investors look at the numbers, rather than look at the property. Working with a real estate broker or agent that understands these concepts is a requirement as well.
The ’smart’ money are people who see value when others do not. We believe that the smart money is in the market today, buying real estate at bargain values. You can be part of the smart money as well, but do not hesitate. The longer one waits, smart money becomes semi-intelligent money. When values go up, there is no smart money, only smart sellers.
Buyer will be coming back to the real estate market in large numbers in 2008. The earlier the smarter.
Call us at (925) 308-7045 for more information.
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