It's a New Year

I love the American system of Capitalism, but it's hard to recognize that it still exists when the federal government is making sweeping interventions in the system. Not only meddling in bank and lending, but in mortgage re negotiations and bailouts. This is an odd political climate, maybe even a storm. It is early in the new administration, but I have very little confidence that spending obscene amounts of money that you don't have is a healthy formula.

This is a time to SAVE, but in light of the new federal money being thrown into the wind, you must consider inflation. What you save today, will not have the same value tomorrow. If you don't own a house, now is the time to look into real estate.

Real Estate is cyclical, but it's never without value. We've just come out of an unprecedented bubble, and if the FEDS don't meddle too much, prices are adjusting nicely. If you are a seller and you MUST sell your home for the best price, then these are still the basics:
* Condition of the property: Is the home clean, decorated nicely with just the right amount of furniture. Can the new owner move right in. Buyers in today’s market are not eager to buy a home that needs work.
* Marketing: Getting the listing out to as many internet sites as quickly as possible. Use photos.
* Price: Know what other properties are on the market in your price range, but more importantly, work with an agent or do some homework to determine the right price.

In this market, I'm going to add one more selling principal that doesn't apply in a sellers market. Depending on what you owe on your property, and the terms you have with your mortgage, you may want to get some professional advice on creative terms. You don't want to become an accidental landlord, but you don't want to take a big loss on your investment either. There isn't one right answer, but if the first three principals are not enough to secure the price you need, (notice it has nothing to do with the price you want), then contact me for some creative "terms" strategies.

If you are buying, how do you know if the price is right? Some experts think that the prices still haven't hit bottom. They think it might drop another 15%-30% or more? Check out this video from my HERO, Glenn Beck.


Remember the $100K line is adjusted for inflation.

You don't need a real estate expert to tell you that today's prices are still too high. Some would advise that our interest rates have never been better, and pricing is a combination of rates and principal. You want the right fixed rate that's sustainable for the length of time you are in the home. The average family today spends less than 10 years in a home and then trades UP. That wasn't always true. How many of your parents paid off their 30 year mortgage? If they experienced the great depression, there's a good chance that paying off their mortgage was at the top of their list. Will prices come back down to that average, should they? I have mixed feelings about that, because despite the rate of foreclosures today, there is a replacement value inherent in the price of a home. Raw materials and labor costs must be considered as well as availability. The value of the dollar, the leverage of a good lending rate, the cost of building and the global need for housing all impact prices.

The answer to the right price comes down to affordability, long term affordability. Regardless of what you paid for your primary home, if you can afford it, then you paid the right price. I'm going to emphasize however, long term. That's foreign to many of you, but that's because we've learned some bad habits, failed to adhere to good stewardship principals and we've got to raise our financial IQ a bit.

I think it's time that we took a serious look at good stewardship and placed value in our home again. If you lost your 100K job tomorrow, would you be able to maintain your lifestyle, including your mortgage for very long? Do you think that it could be replaced with a comparable income w/in a few months or even a year? Do you have some diversity in your income, or is it all from a single source? I wished Glenn would do an earning cycle through history as well as a mortgage cycle. I think you'll find that the chart would be similar. In the course of your life, from cradle to grave, you have very little time to accumulate wealth. If you only have a JOB, it's not going to happen at all. I believe in saving money, tithing and living within your means, but I would also encourage you to create some diversity in income sources. There has to be a balance between saving and investing, and Robert Kiyoski says it better than I do.



So, should you buy even though the housing market has not yet corrected itself?
1. Your income is diverse.
2. The price of the home falls within average rental rates for the area, (that means that your mortgage payment is comparable to current rental rates).
3. You could not build the same house for less with today's dollars.
If all this is true, then absolutely you should be looking to buy.

If you are not credit challenged, then I would suggest looking first at bank owned homes, and do some homework. These are sometimes referred to as REO or real estate owned, but the common denominator is that there is no other owner with equity in the house. Ask your realtor to look up both comparables, and transaction history of the property. The reason that's important is because it will help you decide on what to offer for the property. Banks are hurting, and knowing how much the bank got burned on the default, or not, will help you determine your opening offer. There are a few exceptions to being represented by an agent...but very few. In a bank owned situation there are times when working directly with the listing agent could be an advantage...but only if you have some experience with due diligence.

If you are credit challenged, then I would suggest looking at creative financing opportunities as well as for sale by owner. Your agent can help you evaluate the price and financing options. Not just because I am a Realtor, but you should always find a buyers real estate agent when you BUY a house. There is no cost to you, so find the agent first, let em know what you need and let them find you the perfect house.