Bright Spots amidst the Gloom and Doom

I see the glass half full.   I see opportunities abound.   I see the Federal Reserve Board make some drastic moves in order to restore liquidity and confidence in our credit markets.   The news has been tough on the real estate market.   Still, there are signs this market may not be as bad for the qualified homebuyer.  

The foreclosure crisis is a nationwide problem but the highest foreclosure rates are in formerly hot real estate markets like Las Vegas, Nevada and Stockton, California.   Depending on where you are geographically determines the severity.   About 1% of all homeowners nationwide risk foreclosure.   Not bad when you consider that many of these homes were bought on speculation and never occupied.  

The dollar has devalued (helped by Fed rate cuts) raising the price of all commodities (petroleum gets the headlines).   Homes are a commodity like anything else.   Real estate prices have come down enough where wealthy Europeans (strong Euro) are taking a second look at our vacation markets.   Although the recent trend has been higher, mortgage rates are still near historic lows.   It warrants keeping it all in perspective.  

Remember that real estate is a local phenomenon.   Desirability of a locale determines its demand.   Detroit with its susceptible automotive economy is a far different market than Chicago, the cultural and economic center of the Midwest.  

This may be one of the best times to purchase a home in 4 years.   With this being an election year, it is likely mortgage rates will remain relatively stable as the two major political parties don™t want a full blown crisis on its hands (and get the blame for it).   The fed will probably cut bank rates again, but since inflation is still a very real concern for economists, I imagine we will see a return to rising rates again next year when the campaign is over.  

You can wait to buy a home if you wish but the net cost of buying it cheaper if prices continue to decline might be outweighed by higher interest rates.   First timers are obviously in the best position to take advantage of this situation and have the most choice since the early 1990™s.   Why stay where you are and give your landlord another rent check?   That money is gone and in the long run is a minus sign on your savings.   Invest in yourself.   Home ownership is a time proven first step in investing and has been an excellent equity builder for a long term financial plan.   It tends to beat out other investments.  

The twenty-something generation has not fully entered the real estate market recently, but how much longer can they wait?   The baby-boomers have reached the retirement milestone and will consider downsizing or relocation to warmer climes in the years to come.   Families have outgrown starter homes.   Companies relocate employees.   The point is you can™t shut down the real estate market forever.   There are reasons we buy and sell.   Hopefully we are a wiser society now and each of us is better prepared as homebuyers, pre-approved by a lender first and buying only what is affordable.  

© 2008 Michael S. Amers

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