Jan's Blog

Will 2008 be the year you wish you'd bought real estate?

With lower interest rates and plenty of homes to choose from, now may be the right time for you to purchase real estate. Today's lower interest rates may not be around when prices flatten out, so trying to time the market rarely works to your advantage. Another problem with trying to time the market is that it requires a rising market to know just where the bottom was ... hindsight is always 20-20, isn't it?

In many cases, purchasing a home may be cheaper than renting. In my market area, it is difficult to find a decent rental unit for under $1,300/mth. That's $15,600/year that could have gone towards your own mortgage, instead of paying your landlord's mortgage for him. Your landlord loves you, by the way, because you're making him rich. You are literally buying his property instead of your own. Think about it.

Then there is the distressed (foreclosure) property market. While many of these properties have condition issues and other challenges, in many cases they are priced below market value and offer opportunity for those willing to put in a little sweat equity to make a profit. If you are considering purchasing a distressed property, I suggest you consult a real estate agent who specialized in the foreclosure market to assist you. It can be tricky to navigate.

All investments carry some level of risk, and purchasing real estate is certainly no exception. This is not the time to make decisions that have not been carefully analyzed. What is a good purchase for an investor may not be a good purchase for a typical homebuyer. This is why you should always work with a real estate agent who can guide you in the right direction and provide the information you need to make an educated decision based on your individual circumstances.

Many people wish to wait "until next year, when prices may be lower" which of course, is a risk in and of itself. Prices may be lower, or may be higher. How many times have you waited for that special sweater at your favorite store to be marked down, only to discover that it was snapped up by someone else before you had the chance to purchase it? It may be a simple analogy, but the principle is the same: sometimes you snooze, you lose. If that's okay with you, then go ahead and wait it out. Hopefully you won't want to kick yourself a year from now.

The truth is, none of the experts can accurately predict the real estate market any better than the experts can accurately predict the stock market or what gas prices will be a year from now. If you purchased real estate in 2006 or 2007, you most likely got a great home at a terrific price with a low interest rate. Provided you stay in your home for several years (something I always recommend), you will benefit when property values eventually rise again.

I actually purchased my own home when the market was so hot that homes were selling in just days and for full list price. My home is now worth about $100,000 more than it was when I purchased it. Had I purchased a few years earlier, my home may be worth $25,000 more than that. Had I purchased just two years ago, my home may be worth about what I paid for it. That's the nature of real estate. Values go up, values go down, and when you purchase and sell makes all the difference.

For the typical homeowner, purchasing real estate should be a long term investment as well as a good little tax deduction, a place to live and make memories that will last a lifetime. Would I be comfortable selling my home in today's market and purchasing a new home? You bet your booties. In fact, I wish I could do just that, because I feel this market offers tremendous opportunities. The problem is, it's not the right time for me to do so because my youngest son has three more years of high school. If the market values are higher in three years, I will make more money on the sale of my home. Of course, I will also be paying more money for my new home. Therefore, I will not have gained anything by waiting and may actually lose money because of the higher purchase price on my new home and potentially higher interest rates. But that's life, folks. Sometimes you need to make decisions based on what is right for you and your family instead of making decisions based solely on the financials.

So will 2008 be the year you wish you'd bought real estate?
Source: RE/MAX International

You may or may not be aware that on April 2^nd, 2008 Governor Granholm signed legislation aimed at helping Michigan families facing foreclosure. The Save the Dream Initiative, funded entirely by the Michigan State Housing Development Authority (MSHDA), created two new refinancing options to protect homeownership: The Adjustable Rate Mortgage (ARM) Refinance Program and The Rescue Refinance Program.

The MSHDA ARM Refinance Program assists individuals who currently have an ARM to obtain a 30-year fixed-rate conventional loan which can reduce their mortgage payment and provide stability in monthly housing expenses. The new loan amount, which can be up to 100% of the appraised value, may include closing costs, prepaid expenses, and in some cases the payoff of a second mortgage lien.

The MSHDA Rescue Refinance Program assists individuals who have had late payments on their mortgage and who are at risk of losing their home. Those who are eligible will have a chance to get into a more affordable 30-year fixed-rate conventional loan. The new loan amount, which can be up to 100% of the appraised value, may include closing costs, prepaid expenses, and in some cases the payoff of a second mortgage lien.

In order to be eligible for either of these programs the borrower must occupy the property as their residence, must reside in a single family home or approved condo, and must meet income and sales price requirements – which vary per region.

If you would like more information regarding these programs, I would encourage you to visit www.michigan.gov/mshda and click on the Save the Dream logo. Or, call MSHDA’s toll-free hotline at 1-866-946-7432 for help in finding a homeownership counselor in your area.

Please remember that if you are behind on payments and facing foreclosure, it is imperative that you contact your lender as soon as possible.  Your lender may be able to adjust your rate, accept a short sale, or be open to a deed-in-lieu of foreclosure.  I am willing to speak with you confidentially regarding possible options.