2009, A Year of Opportunity
2009 is a Year of Opportunity
"Adversity breeds opportunity." We read and hear a great deal of adverse information about current real estate market conditions. The good news is that the basic fundamentals of the market hold true. The real question is "where are the opportunities?" Understand current market realities and how you can prosper in them. Fortunes will be made over the next few years. Sale prices of real estate are very low and will probably decline further in 2009. There is fear among sellers. Fear is as strong a motivation to sell as greed is to purchase property. Many homes are selling for less than the cost to replace them. Interest rates are at a 50 year low. Loan qualification requirement are as tough as ever. If you have the credit and income to qualify for a loan, there are some rare buying opportunities in this market.
Many interest rate forecasts for 2009 predict interest rates on conforming fixed 30 year mortgages will be 4.5%, rising to 5.5% by year end. We already are seeing 4.5% interest rates. It is a great time to improve your savings by refinancing to a low interest rate that will be fixed for 30 years, IF you have equity in your property. As the Federal Reserve prints money at an accelerated rate and the Treasury pours money into the economy, I believe inflation must follow. Inflation will push up interest rates, wages, rents and property prices in the long run (18 months to 3 years). If sellers are scared, you can buy property at a discounted price to factor in future declines in value into your offer price.
The cost of owning your home is closing in on the cost to rent the same house. This is a market where realistic cash flow expectations are required. We can not longer rely on a "greater fool" to bail us out if a property is acquired at a high price. Therefore, when you buy, be sure the property will produce a positive cash flow NOW. If you will live in the home, compare the cost to own to the rental value. Do not expect any value appreciation for the next few years unless you can improve the property (shabby properties are selling a huge discounts - this can be a source of great opportunity). Be very realistic with estimated costs to improve property and hold property. Budget for insurance, property taxes AND repairs and replacement of carpet, roofs, appliances, etc.
Happy hunting. Remember what Warren Buffett says; "buy when others are fearful and sell when others are greedy."
Contact me if I can help with your plans.
Mark Goldman, CMPS
San Diego, CA
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