Blog

Buying a home...Will you make History or read about it?

The fact is, that people who can think for themselves and don't let the media hype scare them are the same people that usually do the opposite of everyone else.  At the end of the day, they are the ones that make money before the rest of the world has even figured out what is happening.

It's true, smart money makers are not followers that react to the scare tactics of the ratings whores on the 6 o'clock news every night. Instead they are well ahead of the news reports.

The news broadcasts and newspapers report history, it may be today's history but never-the-less it's history.  The wise man makes history, he doesn't watch it.  Stay with me here if you want to make some money.

Real estate prices have been dropping for some time, in fact long enough that many sellers are desperate to sell before they lose their home. There are some very good deals out there if you want to buy.  In addition, mortgage interest rates are currently very low, making this buyers market a fantastic time to buy as long as you ignore the doom and gloom that the media continues to paint for ratings.  That's right, if they don't have something to sensationalize no one will watch.

When prices are falling few people have the discipline to buy, whether it's a home, stocks or any other asset.  As John D Rockefeller once said, "The way to make money is to buy when blood is running in the streets."

Can we all agree that the proverbial streets are stained crimson now after the housing market has been pummeled for so long?  Massive foreclosures in some areas.  Lenders going out of business and the ones that remain are changing available loan programs daily.  The Federal Reserve is slashing short term interest rates at the fastest pace in decades.  One thing to keep in mind is that Fed Rate cuts always lift the economy, eventually.

Another very important thing to keep in mind is that 2008 is a national election year and the liberal media is NOT going to paint a rosy picture that may help the Republicans.  So the reality is, as soon as the elections are over the economy will miraculously be better and interest rates are sure to rise.  The wise man will take advantage now, of the low rates and sellers desperate to sell, before the sellers realize its not as bad as they thought.

Let's say you are one of those folks ready to buy, but you have been waiting for the market to hit the bottom.  You have good credit and plan on staying put for several years.  It is time to get serious before the inevitable happens and interest rates start to rise that will wipe out the advantage you have been patiently waiting for. You must realize the thing that will make home prices stop falling is the very same thing that will push mortgage rates higher.  So anything you might gain by a further drop in prices might well be offset by rising financial costs.

Consider a typical home that sells for $220,000. You put 20% down and get a 30 year fixed rate of 5.75%. Monthly principal and interest come to $1,027.09. Let's say that 12 months from now, after the election, the recession is history and the Fed is jacking rates up to stem inflation. Let's just say the same house goes for 10% less, or $198,000, you put 20% down, 30 year fixed rate but interest is now up to 6.75%.  Your monthly principal and interest payment is now $1,027.38 and you didn't save anything.  In the meantime home prices may have steadied and sellers might become less willing to negotiate that 10% off that we figured.  You also spent the last year living someplace you really didn't want to be, waiting for the bottom of the market.

I am not the only one that believes this will happen. In my market I see a lot more buyers coming in ready to buy now.

There has rarely been a time in history when people couldn't scare themselves into freezing up and doing nothing... Don't let this happen to you... This could very well be the best time to buy real estate in decades!