My broker was kind to leave a copy of an article from Time magazine in my mailbox, titled "Ignore the Headlines". It pretty much backs up what I have been telling people about our current housing market, and why now is a good time to buy. This has nothing to do with the market bottoming out, real estate agents trying to make money, or a grand conspiracy to fool people into buying.
This comes down to the secret that the wealthy understand and live by, and the mistake that everyone else makes. Many people never become wealthy because they refuse to step away from the herd and take their own leap of faith. John D. Rockefeller, a man all Americans have heard of, was by far one of the richest men in history, with a reported wealth of $1.4 Billion by the time of his death in 1937. He lived by the motto " The way to make money is to buy when blood is running in the streets". I believe he made his wealth by seeing opportunities and taking them, instead of meekly standing with the herd and complaining about his lot in life. While his statement might seem graphic, the logic is timeless - buy low.
Money manager Peter Lynch is quoted as saying that the best thing to buy right now, over stocks, is a home. His statement rings true, "When prices are falling FEW people have the discipline to buy stocks, a house, gold...or any other asset. But those who DO pull the trigger, excel in the long run". Like I have said in past posts, buying now, at least here in the Twin Cities, could prove to be very profitable in the long run. It is common knowledge that holding any investment long-term usually results in good profits, but unfortunately headlines that scream of recession, sub prime woes, housing crashes, rising oil, etc scare many people into sitting on their hands, waiting for times to get better. But if you wait, could you miss the train of gold?
Jim Svinth, the chief economist of Lending Tree, thinks so. He mentions that once interest rates begin to climb, any "further drop in prices might be offset by rising financing costs". The example used puts a home, bought at $218,900 (20% down, 30-yr fixed rate mortgage), with a rate of 5.5%, at a Principal and Interest payment of $994.31. If you were to wait for the market to go lower, and in 12 months, that same home sells for $197,010, but now at an increased rate of 6%, your P&I payment would be $994.94. Pretty much the same number, and you gained nothing by waiting except for the anxiety of holding out for a "better" market.
Buy low, sell high. Right now, the Twin Cities real estate market could be hitting a low. It could go a little lower, but honestly, I just don't see that happening too much. There are many areas where prices are leveling out and some great deals are available. Interest rates are still low, so why wouldn't now be a great time to buy?
If you have good credit, a down payment, and plan to hold for a few years, you really should take advantage of the fallen market. If you want investment property, then please, take advantage. The rental market will most likely see a decrease in vacancies, so being a "landlord" right now could prove to be profitable. I haven't met one investor that has held for the long term and not made money on a property. Remember, it takes discipline to buy when no one else is doing it. The only ones buying right now are the wealthy, or those looking to become so.
So which group do you want to be in? Where do you want to be financially in 20 years?