Buy now or wait?

The real estate market has been in a downward trend for a while and many buyers have been holding out for the market to bottom out. While this is a good strategy, it is worth your while to figure out what its going to cost you to wait for the market to bottom out. Here are my thoughts about it. I want to make the disclaimer that I am not advising you to go out and buy a home. As always, you should do your own due diligence in figuring out what is best for your unique situation.

Lets assume that you are currently renting at $1200 a month, which is reasonable for a descent 2 BR apartment in Atlanta. Lets also assume that you consider buying a $200K house, but want to hold out longer with the hope of buying cheaper. In the buyers market of today, you can buy a very nice home in Atlanta today for $200K, of course depending on the location in the city. The monthly payment for a $200K, 30 year fixed rate mortgage at 5% would be below $1200 a month.

According to the CNN's Real Estate forecast for Atlanta, the decline so far from a peak in second quarter of 2007 is -11.3%. The total decline when we hit the bottom is expect at -14.6% from the peak. This means the house you can buy today for $200K has already declined $25,479 from a high of $225,479. The -2.4% drop expected this year will put the home at a bottom out price of $195,200 which is a drop of $4800. Something hardly worth the wait for a year.

Now lets look at what it will cost you to wait a year to see the bottom. At $1200 a month, it would have cost you $14,400 in rent alone. That is 7.2% of the price of the home. Now lets add to it the $8000 tax credit available to the first time buyers this year to get the sum of $22,400, which is 11.2% of $200K. Which means your effective price of buying the $200K home today is really $177,600. You could say that even if you were to buy the home today or a year from now, you would still have to pay either the mortgage or rent, so it is not a complete waste. However, the difference is that with rent, the money is gone out the window, while you can use the interest paid on your mortgage as a tax deduction and build equity in the home. I recommend talking to a CPA for the tax advantages of owing your home.

The scenario I drew above is assuming that the interest rate for a 30 year mortgage remains at historic lows. When you factor in interest rates which can change quite dramatically, what you save from one end may get sucked out from another. If the rates were to go up as a result of all the financial hiatus we are in today, the interest alone could become a huge disadvantage to make your wait worthless. However, if the rates were to drop down drastically, which I think is quite unlikely, you could come out a winner. Additionally, successfully calling the bottom and the peak is very hard... if it were that easy, many of us would have become millionaires in the stock market! I don't have a crystal ball, but my take is that waiting for the bottom in housing market may not work out for every body.

This side up!

Bloomberg is reporting that the home prices rose 0.7% in February, which was preceded by a 1% increase in January. This is the first time home prices have gone up for 2 straight months in almost 2 years. In addition to this, MarketWatch is reporting that the mortgage applications rose 5.3% last week.

That was yesterday while I was in the midst of writing up this blog about the January and February increases in home sales but I had put it off aside till today as I was busy... just then today, I found this article on CNN about home sales falling 3% in March! I guess that is what was meant by that age old proverb "Don't put off till tomorrow what you can do today!" But then again it saved me from writing an extra blog entry!

According to the article, fortunately this time the experts are predicting there are signs of price stabilization... but then again, with so much volatility any one can be an expert these days. The chance of being right one way or the other looks pretty good!

Headaches with buying bank owned properties

Washington Post is running an article that would be an interesting read for any one considering buying foreclosed properties. While there are many good deals to be found, you must have a lot of patience as banks work like banks generally do... Monday thru Friday from 9 am to 5 pm with many bank holidays that most people don't get... add to it that there are practically no incentives for them to go out of the way to sell bank owned properties as buyers are asking for rock bottom prices. So if you are planning to buy foreclosed properties from banks, be ready for a rough ride. Finding a good Real Estate Agent to help you out will go a long way.

Spring is in the air

The signs of spring is everywhere... the plants starting to turn green with fresh leaves, Cherry Blossoms starting to bloom, the stock market went up for some time and even the housing market is starting to show signs of life! In a market where some states have seen steep losses, seeing only a -2.4% forecast for Atlanta is definitely good news! Click here to check the Real Estate Forecast for your city

If you are planning to sell your home, it would be a good time to start early and give it a fresh coat of paint and do some landscaping or gardening to make it more appealing. Here are some ideas from a previous blog that you can do yourself for very little or no cost at all.

If you have been thinking of buying a home instead of renting and throwing your money away every month, there are many options available to the first time buyer... historically low prices, incredibly low interest rates, mortgages that can be lower than rent and even an attractive gift from uncle Sam in the form of a $8000 Tax Credit!

Rick Santelli vs the "looser home owners"

Rick Santelli of CNBC expressed his opinion about the bailout of what he called "looser home owners." I have not been a fan of bailouts either, however I cannot agree with his position when the rich are bailed out at the expense of the poor and he is angry at the few bones thrown at bailing out the poor. What's good for the goose should be good for the gander as well!

The amount of bias some media companies operate with is truly mind boggling. Whatever happened to reporting news as it is, objectively, without personal bias? This cannot be the sign of a healthy country when comedians give you the facts, and media companies give you propaganda!

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Not to be outdone, The Colbert Report is running a story about Glen Beck and his miserable virtual world. Compared to Fox and NBC's biased views in news, Comedy Central's Daily Show and Colbert Report seems to provide quality news with humor.

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Glenn Beck's War Room

Colbert Report Full Episodes
Political Humor

Rap Battle
Joke of the Day

Citigroup to give a break to unemployed

I read this article titled "Citi to Allow Jobless to Pay Less on Loans" on The Wall Street Journal, that would be welcome news to those who have undergone financial hardships in this ugly and uncertain economy. Citigroup's program claims to lower the mortgage payment for those who have lost their jobs and are at least 60 days behind on mortgage payment. The offer applies only to loans serviced by CitiMortgage that are $417,500 or lower. What is not clear to me about the 60 days behind on mortgage payment requirement is how it applies to title theory states like Georgia, where the majority of the foreclosures are non-judicial. Could it be possible that the lender forecloses on you before you get 60 days behind on your payment??? I dont know the answer, and I am not going to speculate either, just pointing out a possibility. I found this well written article on Georgia Foreclosure Law, written by McCurdy & Candler, LLC. If you are facing the unfortunate prospect of foreclosure due to a job loss, and your loan is serviced by Citigroup, you may be in luck.  However, if you are thinking of falling behind on your mortgage payment in oder to take advantage of this opportunity, I would suggest consulting a lawyer that knows and can advice you about the full implications of how this may apply to you. Please note that posting the article on "Georgia Foreclosure Law" by McCurdy & Candler, LLC is not a recommendation or an endorsement as I am not familiar with them. I have written another other article on foreclosure prevention that may be worth a look.

First time buyer incentives abound

There are numerous advantages to purchasing a home this year. In addition to the low interest rates, high levels of offordability, and incredible deals due to the financial crisis, there is an additional $8000 or 10% of purchase price (which ever is less) tax credit for first time home buyers. In order to qualify for the tax credit, you would not have owned a home for the past three years, and the purchase must be made between 1/1/2009 and 11/30/2009. Unlike the previous $7500 tax credit, this is not a loan and does not require repayment if purchased within the specified time period. However, in this unpredictable market, the buyers must exercise caution not to get into homes they cannot afford.

If you are looking for a great deal in the Atlanta and surrounding areas, I can help you find a bargain and represent your best interests. Be sure to read the differences between exclusive and non exclusive agreements and why you should work with an agent even if you are buying a brand new home.

Snow in Suwanee

We have been pretty lucky to have a mild winter so far. It rarely snows in Atlanta and the first snow of winter fell today to remind us that the winter isnt over yet! Here are some pictures I took from the Sims Lake Park in Suwanee.

Stream

Hiking Trail

Small Pond

House Designs

When it comes designing houses, people come up with ideas as diverse as the universe itself. Here are some interesting ones I saw on youtube

Going green? Here is a guy that is making Recycled Homes

And homes that the big bad wolves dream of blowing down

Here is an interesting Sliding House

This is a nicely built cave house, but unfortunately being foreclosed.

Can you change the world?

Can you change the world? Can a single person determined to make a change for the better succeed in a world full of obstruction and negativity? More importantly, what if you were to believe the world of negativity that you cannot make a difference and join the self defeating ideas of a world asleep? Surely, you would have lost even before you ever started. However, if you believe you can give a try despite the world of negativity, you have given yourself a fair  chance. A chance that can make a difference. Here is a wonderful video that says just that.