Real Estate – Is Now The Time To Buy?

| August 3, 2009 | 0 Comments

Many of you are following my saga of buying a new home.  You read along as Linda and I looked at house after house.  We’d find one only to get outbid by other buyers.  Finally after several months, we found ourselves in the catbird seat on our dream home (after yet another bidding war).

The roller coaster continued.  Squeezing a mortgage from a bank was like getting blood from a stone.  Despite stellar credit and a sizeable down payment, finding a willing lender proved difficult.

Isn’t it a crime that these banks are getting billions in taxpayer dollars and are unwilling to lend?

A top notch mortgage broker proved invaluable in securing our financing. After purchasing the property, renovations began.

Renovations brought another set of problems and experiences.  Plumbing installed wrong; Painters not paying attention to the job at hand; A small fire (which was quickly put out); Problems with noxious chemicals for the floors; And a water heater leaking two days after starting repairs.

We were pleasantly surprised by a few things…

For example, the extra insulation the house contained (which is key during a hot summer).  And the surprise visit of our local bull snake (we named him Oliver).  He slithered through an open door and right into the living room.

Our neighbors are friendly but mostly keep to themselves… and the horses love their new barn and turnout.

Despite all the difficulty and problems, we couldn’t be happier in our new home.

This leads to a big question… Is now the time to buy real estate as an investment?

Buying a house to live in is one thing… buying for investment is another.

We all know the background of the housing industry.

The housing industry across the country has been decimated.  A few years ago, the Federal Reserve started raising interest rates.  Mortgage rates moved higher and sub-prime borrowers with adjustable rate mortgages found themselves in hot water.

The increase in payment was too much to handle.

With mortgage delinquencies moving higher, banks started tightening lending standards.  Loans became harder to get.  The pool of eligible buyers shrank dramatically.

Fewer buyers and tightening credit crushed demand and home prices started falling.

The vicious cycle accelerated.  With fewer and fewer buyers, home prices had to fall.  Add to the cycle a weakening global economy and a falling stock market, and we’ve got a real ugly mess.

So, is now the time to buy?

Let’s look at some recent data.  Home prices moved up last month, according to the Case-Shiller Housing Index, which tracks home prices in 20 key cities (including Phoenix).  For the first time in three years, home prices actually increased.

According to the data, 13 of the cities recorded higher prices, and two (Charlotte and San Diego were flat).  Could the housing downturn be over?
Let’s look at some other data…

New housing starts are up for the month of June.

Home builder sentiment is up (confidence is returning).

Mortgage rates are near 50 year lows.

The Federal Government’s giving first time homebuyers an $8,000 tax credit.

Individually, these are all great signs of life in the homebuilding industry. Taken together, it’s a clear sign the industry’s on the upswing.

In my mind, it means now’s the time to be buying.  If you have a long term outlook, the cash and/or the ability to borrow… consider picking up a few rental houses.  With today’s depressed prices, everything you buy should be cash flow positive.

Trust me.  In five years, you’ll look back and kick yourself for not buying more.

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Category: Real Estate

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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