Rebound? Yes, no, maybe
Is it time to buy or is it time to sit on your hands and your checkbook? The final decision about the right time to buy real estate is ultimately up to you, but a little well placed advice could make the decision, making process less stressful.
Warren Buffett once said “be fearful when others are greedy, be greedy when others are fearful,” which is why Uncle Warren is betting on a continued recovery in the housing market. Of course Buffett is investing in big ticket items like real estate investment trusts, shopping malls and apartment buildings but the principal applies to small investors and individuals considering residential properties. If everyone else is afraid to commit to housing it stands to reason according to Buffet that it’s a close to a perfect investment.
The real estate market may not be perfect but it is improving based on the latest national real estate statistics. U.S. Home prices in June showed their first year over year increase in almost two years. According to the Case-Shiller Index of 20 major metropolitan areas home prices rose by 0.5 percent in June compared with a year ago. And although home prices are still down by almost 31 percent from their 2006 peak, this ended a 20 month streak of declines returning real estate values back to 2003 levels.
In addition, The National Association of Realtors said its seasonally adjusted index of pending sales of existing homes increased 2.4 percent in July from June. Starts of new home construction also rose 6.9 percent in June. All of this is pointing to a strong spring selling season in most parts of the country and certainly a strong winter selling season in Florida.
As previously reported the rental market is very strong. In regions around the country it’s still cheaper to buy than rent. If you buy a home or an investment property chances are that the rent will cover the cost of financing at today’s still very low rates, and with real estate indicators pointing up you may also see the property appreciate.
Warren Buffett notwithstanding, any investment has some risk attached and your pockets are probably not as deep as The Oracle of Omaha’s is. We still have plenty of uncertainty in the real estate market with approximately 30 percent to 50 percent of existing mortgages in the country underwater. These homeowners will eventually need to decide to either keep paying their mortgage and hope prices will improve or walk away. If they walk away it will most certainly put downward pressure on home prices.
The economy is still a lingering fear that could crush the real estate recovery. Bad economies with high unemployment spell trouble for real estate. Potential buyers must feel secure that they will continue to have a job in order to feel comfortable moving forward and qualify for financing. That being said at this moment in time real estate presents an attractive long term investment for both homeowners and investors considering prices and financing rates.
So is this the time for you to be greedy and take the plunge? Unfortunately the definitive answer to that question will only be found within yourself as long as you’re unafraid to make a decision.