As an active Realtor I am regularly on social media sites that have a real estate focus such as Zillow and Trulia. I remain extremely surprised at the vast number of contributors to these sites who continue to discuss home ownership in terms of â€œtiming the marketâ€ (You never could and never will be able to; any more than you can time the stock market) â€œinvestment potentialâ€ (This is precisely the same term that caused the housing bubble) etc. Apparently the memories of these contributors are remarkably short.
This morning as I was getting ready to answer some of the posted questions, I read through some of the posted â€œanswersâ€. The question du jour seems to be â€œShould I buy now or wait?â€ The answers were all over the place.
Letâ€™s get it straight, â€œHome ownership has and will remain both desirable, important and a long-term valuable asset long after Social Media sites have vanished to be replaced by computer chips embedded in our heads or whatever it is that will be the next big thing.
Historically people buy homes primarily for the shelter they provide. When discussing home ownership you must consider this first and foremost. Unless you are a child living at home, there is an expense connected to having a roof over your head. This leads to the question of, â€œWould you prefer the space your living in to be your own that you can decorate as you like, and do with as you please, or would you rather live in a space that you did not own and were limited in what you could do with it while you paid a monthly rent that helped someone else buy the property?â€ For those hung up on promoting investment opportunities as places to park your money, try living under your stock portfolio, or your holdings in gold, diamonds, foreign currencies etc.
Secondly there is a tremendous value to society as a whole in having a large segment of the population owning their own homes. It has been shown in numerous sociological studies that home ownership serves to stabilize families as well as communities.
Third, itâ€™s simple economics; the population continues to go up, while thereâ€™s a finite amount of land that can be built on that will support people and is considered a desirable place to live offering the right combination of nearby employment opportunity, social services etc. Â How can anyone discuss investment without considering â€œSupply and Demand?â€ Iâ€™m not knocking stocks, bonds, foreign currencies, etc but stocks and bonds are printed every day, foreign currencies go up and down (like real estate), and gold is actually a relatively worthless metal except to a select group that imbues it with a value that simply isnâ€™t reality based. Itâ€™s too heavy to transport easily, has limited industrial uses, and is primarily used for decorative purposes.
Knowledge is power, while opinions are a dime a dozen. If potential homebuyers do the research and what they will find is that in the past decade the average 30 year fixed rate mortgage in the US was 6.5%. Â In 3 of those years it ranged between 7.5% - 8.25%. Â If we look back over the past 20 years, (I know Iâ€™m talking really ancient history now) the average US mortgage rate for a 30 year fixed was 10%. Â In case some of you have forgotten just 6 months ago rates were 5.5% as opposed to the 4.5% you can easily find today. When they return to 5.5% in the next 6 months (and Iâ€™m willing to bet that they will)Â it will have the same effect on your monthly payment as homes prices going up by roughly 10%.Â For more information on the comparison between rates and values you can see my posting "Should I Buy Now or Wait to see if Home Prices Fall?" http://wp.me/pufDb-5j
Home ownership isnâ€™t for everyone, you need to have an income you can count on, and a reasonable certainty that you will remain in the area you are buying in for at least 5 years or more. Over the 20 odd years Iâ€™ve been having conversations with homebuyers, Iâ€™ve advised many to buy less house than they were pre-approved for or in some cases to offer less than they were willing to, to consider their time horizon, to factor in maintenance etc. The one thing Iâ€™ve never discussed with any of them was market timing as I consider this among the worst reasons to buy a home.
If you are considering buying a home thereâ€™s no reason not to see what people are saying about an area on these Social Media web sites, but remember you don't know who is really writing these posts,Â real estate is local and to borrow a phrase from Jesse Jackson, â€œText without context is pretext.â€