Archives

November 2007

Why Buyers Should Take The Bait

Posted at 5:01 AM, Nov. 30, 2007

One That Would Have The Fruit, Must First Climb The Tree...Thomas Fuller

Here are a few compelling reasons why buyers should, excuse the phrase, get off the pot.

1) Interest Rates are below 6%. Wow. Waiting for that additional $10-15,000 drop in price will mean squat if interest rates go back up. Judging from the concerns on Capital Hill with Fannie Mae and Freddie Mac, which by the way are the primary reason there is money out there to loan to consumers, interest rates could very likely go back up to keep investors happy and the government can avoid using a safety net.

2) If housing costs are going up, guess what, so is rent. Opting to rent does not save consumers from the burden of expenses. Landlords just pass it on down. In the end, renters pay more with nothing to show for it except receipts.

3) The Evils of Subprime Markets. The reality check here is that the first and foremost reason there is so much trouble in the mortgage industry is that consumers were taking on more than they could handle. Speciality products are not bad. It is very reasonable to use an Interest Only option or ARM to get in the door as long as you look at the worst case scenario and here is the key, apply discipline.

Most stories that I have read concerning those facing the perils of readjustments usually have several factors involved. A) Low income or No income at all B) Never took proactive measures to clean up their credit and refinance at a better rate C) Used their homes like a piggy back to purchase expensive cars and fund vacations or D)Barely could afford the home even at the lowest rate. Just because you can qualify for a $450K mortgage does mean you should. Sit down and examine your cash flow and see what is reasonable. Champagne taste on a beer budget always spells disaster. Be mindful of housing prices in your area and buy what is in alignment with your budget, not your fantasies.

4) Foreclosure is a small segment of our market. Places that have been devasted will include massive job loss such as Michigan for example. Cases of too many eggs in one basket. Other places hit hard involved people leveraging themselves to get rich quick in real estate. That doesn't even belong in the same sentence! The remainder mostly applies to those casualities of the sub-prime market meltdown. I won't even call them victims for many had opportunities to strengthen their position in their home once in the door and they failed to take it, or abused the privledge of home ownership to begin with. I am not trying to be harsh, but the media has played way too long and too hard on stories that quite frankly, were examples of what I just mentioned.

Now is such the ideal time to be taking advantage of rates and low price tags. Buyers markets are short lived in theory. I know several whom have turned away from opportunity because of the fear of commitment. One saying that always sticks with me is this, Tough times can come against you often, but opportunity doesn't. Don't count yourself as the many who will look back one day and said "If I only knew then what I know now".

The Window of Rates

Posted at 4:22 AM, Nov. 29, 2007

I have come across articles that have outlined a narrow window for homebuyers. A drop in interest rates that SHOULD encourage action. However, many markets here in Chicago have experienced a significant drop in buyer activity with showings and contracts. Its one thing to address competitive pricing and home appearance, but what if a home sits without ever so much as being seen?

With growing concerns of the economy such as gas prices, the cost of food and utilities on the rise, consumers are down right afraid to buy such a large item as a home. I have witnessed price drop after price drop and still little has been scooped up off the market. But here is where buyers need to make a decision that could change their future for the better.

Housing Prices are dropping, yes. However, markets tend to experience more stability in pricing in the high season versus times like now around the holidays. The winter months is when you will find real estate professionals and investors looking for deals. Markets that have sold comparable properties this past Spring and Summer for 10% higher price tags than what's currently out there. What good are price cuts if no one buys? In fact, I think the lack of activity will have the reverse effect for sellers mentality with thoughts such as "Why should I keep dropping my price? No one is buying anyway." Market time means little anymore since many reasonably priced homes are racking up time. I predict this opposite is going to happen when sellers are fed up with trying to do back flips for buyers and its in vain.

Opportunity is Knocking

Posted at 3:26 AM, Nov. 28, 2007

Okay, I have to say I have been stumpt by the recent behavior of buyers and their retreat from the housing market. Am I surprised, no.

With media headlines continuing to feed on the fear factor, buyers have all but vanished from sight. Even the best looking properties with the most to offer are sitting off to the side without so much as a peek from lookie-lous. What is the concern? That the market will continue to plummet and any money invested would be sucked into this vortex known as forclosure? It is downright criminal how selected cases of misfortune have become the mainstream in the minds of so many potential buyers. The mortgage industry is not the big bad wolf waiting around the bend to pounce. Speciality products are not evil, just misused.

So at a time of year when there are plenty of good deals to be had, despite current market conditions, I find many of my potential buyers shutting their doors on opportunity. There are properties right now that even just a couple of months ago, were $20-30K more. But come spring time, sellers will have renewed hope and unless they are hard-pressed, will keep pricing even-keeled. If that wasn't incentive enough mortgage rates on a 30 year fixed are the lowest they have been since early May. Real Estate 101, you make your money on the BUY, not the sale of a home. If you spend $30K less than a neighbor for a similiar property and sell 4 years from now at the same time you'll roughly get the same price. However, very savvy Buyer B who chose to answer the call of opportunity, paid less in the begining, thus, net more in profit. Great deals in real estate RARELY come along when the market is healthy ( I am not talking about the feeding frenzy when people were buying on speculation). Which only goes to demonstrate that the average buyer will not reap wealth in real estate if they are not willing to step out. Even Donald Trump was quoted recently how the time is NOW for great deals in real estate.

"I'd rather wait til the market bottom's out". Listen buyers, if it did, you wouldn't recognize it anyway and unless you plan on buying today and selling tomorrow every buyer can afford to wait out the market for better conditions before selling again. Most importantly, most buyers purchase for a home to live in and grow, not trade them like stock. Chicago is still very stable with employment, which by the way,unemployment is the LEADING cause of forclosures. If you think that by waiting until the market seems safer to buy, opportunity has passed you by. In fact, its doing a dance in your face right now!