IGNORE THE HEADLINES!! Except for this one of course. Recently, I have just been reading a lot and analyzing the Real Estate market on the MLS. There is a darn well good reason for investing now than ever before, whether it is in Real Estate or on in the Stock Market. Now you’re probably thinking, “Why should I believe you?” and “How accurate or believable is Michelle Lu-Do’s information?” Well, let me tell you that I have access to all this information just by being a Real Estate agent. People like you come to us for help because you just don’t have access to such information. Even though the internet is a very powerful tool, not all information is freely distributed to the general public. So lets backtrack to the reason why you’re reading this very blog. Since 2005, the Condominium Real Estate market has risen dramatically making it less affordable for people to purchase even the smallest unit/suite on the market in the downtown core. Housing itself within the GTA has gone up a tremendously. For those who have already started looking for their first home, we all know and have felt the price increases.
According to the famous and famed manager Mr. Peter Lynch, how does one tune out all that negative chatter and buzz on recession, housing, sub prime market woes, the scary credit crunch, the $100 oil and nukes in the Middle East? All this negativity is enough to make everyone think twice before making any major moves. So Mr. Lynch is asking, “WHAT ARE YOU ALL WAITING FOR?” … the answer is obvious … “A MIRACLE!” Just kidding. But seriously now, what are we really all waiting around for? All this waiting may just let that window of opportunity slip away before you know it. Most buyers who have already come across their dream home second guess and tell themselves “Maybe I’ll wait because something even better might become available on the market” or “I’ll just wait for prices to decrease before I buy.” After all the waiting and time wasting, before you know it, months go by, the market changes again, prices are higher, mortgage rates go up by more than half a percent and you’re still sitting there waiting around. When prices are falling, very few people have the right discipline to purchase a house, stocks or any other assets. Those who have the same thinking as the smart investor will excel in the long run.
SO WHAT ARE YOU STILL WAITING FOR? …There is a potent case for buying now and let me tell you why … Let’s say that you are an emotionally and physically ready to be a homeowner in today’s market. You have obtained good credit, plan to live in your new home for more than 5 years and have been waiting (hence the word “waiting”) for the perfect entry point to make the big decision. You have to get serious with yourself before an inevitable rise in interest rates wipes out your advantage. Why do I say this you ask? — If you’re still asking this question then you obviously haven’t been following or understand this whole reasoning. It is BECAUSE the thing that will make home prices stop falling is the very same thing that will push mortgage rates higher!! I’m sure you all went to school and learned the whole cycle about Supply and Demand, economics and market trends, right? According to Jim Sninth, who is Chief economist at mortgage firm Lending Tree, “anything you gain by a further drop in prices might be offset by rising financing costs.” If you haven’t absorbed the very least, I will draw out a picture for you in regards to why waiting for the right moment does not exist. You are interested in a home that is selling for $218,900. You put a down payment of 20% and obtain a mortgage at today’s rate of 5.5% (hypothetically speaking - I think mortgage rates went down even more than this recently). Monthly principal and interest comes to about $994.31 — 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 calm inflation. If the mortgage prices rise just half a percentage point, to 6%, your monthly payment would be $994.94 and you’d have saved absolutely NOTHING after all the waiting and time wasting of course. On the other hand, home prices might be steady and sellers might become less willing to negotiate … in the end you have spent an entire year living in someplace you rather not be living in.
(EXAMPLE)
TODAY’S PRICE: $218,900 - put down 20% with a 30yr fixed-rate mort.
TODAY’S INTEREST RATE: 5.5% - current rates after recent declines.
MONTHLY PAYMENTS OF MORTGAGE: $994.31
~compare it to the following~
COST IN 12 MONTHS FROM TODAY: $197,010
INT. RATES 12MNTH FROM TODAY: 6% - recession ends n rates go up
MONTHLY MORTGAGE PAYMENTS: $994.94
CONCLUSION: If you waited a year to buy, you would have saved nothing and spent a year living someplace you rather wouldn’t be. (source: Lending Tree and Times Magazine)
The first step is to contact a licensed energy advisor to arrange an energy assessment for your home. He or she will provide you with a printed report that shows you where your energy dollars are being spent and what you can do to improve your home’s energy efficiency.