In My Opinion                                                                                                           

 

 

 

Every day, several people will ask me "So, how's the real estate market?" I always answer right back, “Great. How’s your family?” That may seem like a strange response, but to me your family situation is what drives your home purchase. I don’t think that market conditions should override your personal needs. Your family and your dreams should be your deciding factor.

 

 

Let me explain. Recently I’ve started planning my home move with my family. I have children who will be changing school systems next fall. It’s a good time to start my family’s search for a new neighborhood, along with the school switch. Am I concerned with market conditions? Not particularly, yet I do have a home to sell. Will it sell for less money than last year? Probably. Can I buy a home for a little less this year? Again, probably, yes. Everything really is relative in real estate.

 

 

I know, I know, the newspapers and Web sites say to wait. I ask, wait for what, for interest rates to rise? Rates are still near all-time lows. If I waited, the rise in interest rates would increase my cost.

 

 

How long should I wait? Should I wait for years, until my kids are out of school? I don’t think so; that’s not smart for my family.

 

 

Okay, maybe I should wait, because house prices are still going down. Are the prices really dropping in my neighborhood? How much will they drop? Most news programs speak about home price trends across the country, yet the statistics from other states really don’t matter to my family here in Connecticut. Real estate is a local market.

 

 

Here’s an example of how the local market affects my family:

 

 

If I buy a home right now with a mortgage amount of $200,000 and I qualified at 6.5%, my principal and interest (P&I) on my thirty-year note will be $1,264.14 a month. Now let’s assume I wait until late next spring and the house values drop five percent, but the interest rates goes up .5%. Based on the new mortgage amount of $190,000 (and the new 7% interest) my P&I payment will be $1,264.07 a month.  Wow, I’ve saved seven cents a month! That’s not even enough to buy a stick of gum, never mind a cup of coffee. And what has all this intelligent waiting brought my family? Certainly not the lifestyle we deserve. And if home prices hold steady? Then I really lose my hero status at home.

 

 

It comes down to monthly cash flow. It always has and it always will. The banks will qualify your “ability to pay” quotient based on monthly income versus expenses. If you are within certain ratios, congratulations; you qualify for a conventional mortgage. If not, it’s back to the drawing board. My recommendation is to meet with a seasoned real estate agent and examine your situation. Do a “buy versus rent” study to see where  you are. You may be surprised at what you really can buy today.

 

 

 

Investment Thinking

 

 

For a moment let’s look at investors. They have had a great deal of impact on the market lately. Sure, if you are a “property flipper” and all you do is fix up homes and sell them, you have to do your homework. That’s like being a day trader in stocks and bonds. The definition of real estate speculator is an owner planning to keep a home less than one year before selling.

 

 

If you are like most first-time homebuyers, does this sound like you? No, statistics say you’ll be living in your home for four to seven years. That’s a big difference. This fact alone should safeguard you to a degree from short-term real estate market cycles that in Connecticut have been historically in cycles of about five to seven years.

 

 

When we talk about personal homeownership and the personal family benefits, we’re usually talking “the American Dream,” single-family, owner-occupied properties. It’s as American as apple pie.

 

 

What do you do if your family is expanding? Do you now need a yard for your child, after you've been renting a condo for the last three years? You must make decisions designed to increase your happiness and well-being, to increase your quality of life. Your finances are only one component of your “life” investment.

 

 

If you've decided that your life warrants a positive move, here are a few tips to help you be sure your lifestyle move will be a good investment:

 

 

 

1. Hire a good real estate agent       

 

Ask potential agents questions about how they interact with first-time homebuyers. Do a “buy-versus-rent” study. Try to find a real estate agent with the designation of Accredited Buyer Representative (ABR) who has spent the time and money studying to become your advocate. Once satisfied with your choice, enter in a buyer-broker agreement. The agreement costs you nothing and guarantees an agent bound to help you in your search, negotiate on your behalf, and keep your private stuff private.

 

 

 

2. Try to make a down payment of 10-20% or more.

 

Okay, this amount is a big one, I know.  There are still mortgages available that will accept a very low down payment on your part (0% to 5%, credit score permitting); however, a mortgage with an LTV (loan to value) of 80% or less should insulate you from any short-term market swings. It will also lower your monthly payment. There are programs that are not critical on where that down payment comes from. Yes, it’s like the old days, when parents helped out with the down payment. Be nice to your parents, kids!

 

 

 

3. Spend with intent

 

I know, again difficult, but do you really need that triple latte cappuccino? Study your spending habits. Life is in the details. A five-dollar-a-day cappuccino habit costs you $1,825.00 a year, and many people spend more. Look at all your habits, including cigarette smoking, and see where you can save money and improve your health at the same time.

 

You decide how you spend your money. Decide what’s important to you and spend with real intention.

 

 

4. Spend time doing your own research.

 

There are many ways to get property information today. The Internet has many good portals. You may even find a great bargain before anyone else. Your real estate agent gets paid to know neighborhoods, help you with market trends, and guide you through the process of the transaction. Pick one you trust and share everything with him or her, but don’t be afraid to get your hands dirty and get involved too.

 

 

All in all, it’s a terrific time to own a home in America. Be smart, get wise counselors, and make good decisions. We’re here to help.

 

 

The next time someone asks you, “How’s the market,” say “Terrific! We just bought our first home. Could the market be any better? The question is ‘How’s the family?’ and we’re better than ever!”