National Media Starts to Agree, It’s Time to Buy

Amidst all the doom and gloom scenarios, some members of the national media are beginning to suggest that it is in fact, time to buy.  In a recent article in Time Magazine Dan Kadlec states, “anything you gain by a further drop in prices might be offset by rising financing costs.” 

Moreover, “Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today’s rate of 5.5%. Monthly principal and interest come to $994.31. Let’s say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you’d rather not be.” – Time Magazine

A couple points for clarity:

1. Chicago did not see close to the price drops seen in many other major metropolitan areas.  We saw gains of 2% down to decreases of 4% depending on the index you consult. 

2. “The irony is that in the time Kadlec did his research and when the magazine came out, interest rates were already back over 6 percent, making his example all the more compelling.” – Realty Times

3. While Kadlec mentions the possibility of “living someplace you’d rather not be” for an extra year, his example does not touch on the inevitable loss of equity a buyer will experience by waiting an extra year to purchase.  Equity build up is fundamental to building wealth through real estate purchases. 

For the Time Magazine article click here:

http://www.time.com/time/magazine/article/0,9171,1713483,00.html

For the Realty Times commentary click here:

http://realtytimes.com/rtpages/20080229_realtyviewpoint.htm

 Best,

JLC

Home Prices and Interest Rates, Playing the Waiting Game

I have recently had multiple conversations with prospective buyers.  In these conversations the same concern seems to pop up continually, to paraphrase, “I just want to wait until prices drop a little further and I can still get a low interest rate”.  This line of reasoning concerns me for two reasons.  First, the two factors mentioned here, home prices and interest rates, do not move in tandem.  To that end, we have not seen a major rebound in housing prices, but according to Realty Times’ David Reed, “mortgage interest rates shot up this past week at the fastest pace in 20 years…”  Second, there is no moment of critical mass where home prices and interest rates will be at their absolute lowest and then begin to rebound together.  If this moment existed everyone would take advantage, it is simply not that easy. 

So how do you make a decision?  Look at a number of variables and act when more are in your favor than against you. The following speak to current conditions:

1. Extensive inventory on the market (Sellers competing for buyers who are willing and able)
2. Interest rates are some of the lowest in the last 40 years (Money is cheap to borrow)
3. New construction is at a 17 year low (Inventory will start to diminish allowing prices to rebound)
4. Personal Preference and Judgment (Would you be happier in a home you own?)

Click the link below for the full article:
http://realtytimes.com/rtpages/20080222_realtyviewpoint.htm

 Best,

JLC

Buyers Benefit as Developers See Difficult Time Ahead

 Developers will face quite the quandary in 2008.  While demand is slowly rising, sales of new downtown condominiums and townhomes fell 36% last year.  6,000 new units will become ready for occupancy in 2008 and many developers will not be able to bare the financial burden if they are unable to move these units.  Case in point, the developer of Ashton Lofts on Ashland and Fullerton is facing foreclosure due to their inability to repay the bank for construction loans.  While this will not effect individuals who have purchased there, it will certainly alter the asking price for the remaining units.

Opportunity for buyers reigns supreme as developers offer incentive laden programs to entice the public into buying.  I have even seen developers offer 6 months of assessments, mortgage payments, and help with closing costs just to close out their developments.  Call me if you have any questions or are interested in these sort of opportunities.

View the article below for more detailed information:

http://chicagorealestatedaily.com/cgi-bin/news.pl?id=28206

Best,

JLC