Housing Market Showing Signs of Life
12 January 2012
The local housing market is showing signs of life. Sales are up and the number of homes on the market is falling. Should you sell your current home or rent it out? Is now the time to buy a small home that you can rent out when you next move or should you splurge for a prime location? While the answers depend on your unique situation, the rules for success in the real estate market are the same today as they have been for years. Slow and steady wins the race.
I talk to a lot of people looking to buy or sell their homes. The trend is very clear. Buying a home is fun. Selling a home is stressful. This is in stark contrast to how people felt 6 years ago. My advice to nearly everyone is the same based on a variety of factors in today’s market. Buy a new home and rent out your old home. The only time I think you will be better off selling current home is if the bank says you have to in order to get a loan for your next house. Otherwise, rent it. Even if you are moving to Japan. Here’s why.
With a 30 year conventional loan, you will pay down your debt by about 10% in 5 years (almost 20% in 10 years). For those of us who are underwater, it only takes time for us to get back to the surface. In 5-10 years, nearly everyone who currently owns a home will be able to sell and do better than break even. Today, many people are not in that position. The good news is that your tenant will be paying down most of that debt for you. Who knows, maybe you will keep the house for the next 30 years and then you will own it with no mortgage payment.
Current prices are depressed. Buy low and sell high, right? Don’t buy high and sell low. More and more people are electing to stay in their current homes which is gradually reducing the number of homes on the market. I am starting to hear people say “It is difficult to find a house I like.” There is a demand for quality homes at a fair price. Historically, this has led to price appreciation. While I do not expect to see a crazy market like we did back in 2005, it is reasonable to expect the economy to improve at some point in the next 5 years or so and with that an increase in consumer confidence. I am personally banking on the fact that home prices will rise in the near future. As soon as I get a free moment I will buy another rental property, maybe even a new home!
The decision to buy a home instead of rent or to move up if you are growing out of your current one should be easy.
At every price point, there are homes and neighborhoods to steer away from and others that are great buys. This has always been the case and always will be. The trick is knowing the difference. When you are ready, give me a call and I will help you make the right choices for you and your family.
