Why Now Is The Best Time to Buy Real Estate?

Why is now the best time to buy a home!

Susana Cohen - RE/MAX Palos Verdes Realty
May 2010
Palos Verdes Estates, CA

Dear Valued Client/friend,

We continue to appreciate the opportunity to reach out to you, especially with my amazing team at RE/MAX Palos Verdes Realty to service your Real Estate needs in Palos Verdes.

Home sale activity decreases during the winter months and increases during the summer months. Based on this fact, the best time to sell would be during the summer and the best time to buy would be during the winter. How many people do you know are looking to purchase homes on Christmas Day? However, with the housing crisis still unfolding, there may be hesitation to buy.

Moral of a Millionaire's Story ...

People often say to me, "Since mortgage rates are at all-time historic lows, how can I pass up this buying opportunity?" At our meetings, I ask: "By a show of hands, how many people think it is a good time to buy right now?" The answer consistently points to 99 percent of the people raising their hand. In fact, I am actually seeking out people who don't have their hand raised to ask them why they don't think it is a good time to buy. Then, I start explaining some compelling statistics like:

• In 2008 we had 2.6 million homes go into foreclosure.
• Currently, 3% of the 120,000,000 US homes (3.6 million) are in foreclosure and another 8% (9.6 million) are at least 60 days late.
• The loan business is an $11.8 Trillion business.
• According to a recent 60 minutes special, they are predicting $2.6 Trillion of the $11.8 Trillion of loans to go into default by 2011, which is 22% of all outstanding loans in the US.
• We are in the 4th or 5th inning of a 9 inning baseball game as CBS 60 Minutes Reports at CBS News Story

Now, after explaining all these statistics, the next question I ask is, "Out of the people who just raised their hands, how many people think property values are going down with all these foreclosures we have now and the ones that are coming?" What percentage of people raises their hand? All of them. I reply, "You all are telling me that it is a good time to buy, but real estate prices are going to drop? If a foreclosure closes in your neighborhood, what happens to the value of your property, up or down?"

Now, another important question I ask is, "How many people want to buy a stock if you know the stock price is going to go down in value after you buy it?" So here is my point and the difference between real estate and stocks. When people buy stocks/mutual funds they pay cash for the entire amount. When people buy real estate, a very large percentage of people finance the transaction.

The moral to the story: If you are paying cash, you might want to wait to see what happens with property values over the next 12 - 24 months.

Recently, I came across a client, John Doe (for confidentiality purposes I am using a fictitious name.) John wanted to buy some foreclosures and REO's (Real Estate Owned meaning Bank Owned properties). I asked John this question, "How are you going to pay for the properties?" John's response was, "With cash." I replied, "I would love the business, but are you aware of what is going on right now?" I went over all these statistics with him and further explained that you should probably hold off seeing what happens over the next 1 - 2 years. He agreed. I perfectly talked myself out of a big transaction because this client had a lot of cash versus the concept of using OPM (other people's money, i.e. loans).

• OPM Concept and Why It Makes Sense to Buy Today: If you are like most people and you are going to finance the property, now is probably a great time to buy due to all-time historic low rates and the incredible financing Solomon Financial can get for you. There is no guarantee that rates are going to remain this low, if/when property values come down some more over the next 1-2 years. So, you rather take the guarantee and have all-time record low rates and know that as long as I own the home for at least 7 years, it is going to be worth more than what you paid for it? That's my personal investment philosophy and what my family has done who are also real estate investors.
• The State of California and the Federal Government are doing whatever they can to help ignite the ailing Real Estate market and have added a few more incentives (up to $18,000 in tax credits) recently.
• If you buy a newly constructed home in the State of California, the 1st 10,000 people ($100 million allotted to this program) get a $10k tax credit. If you are a first-time homebuyer (or you haven't owned a home in the last 3 years), the Federal Government is also giving an $8k tax credit as well. So, you could qualify for up to $18k of tax credits in California if you are a first time homebuyer and are purchasing a brand new home.
• Finally, some better news in Real Estate - the Pending home sales index based on purchase contracts signed in March rose 3.2% as first-time buyers waded into the market to take advantage of favorable prices and all-time historic low interest rates. Read the New York Times Story: Existing Home Sales Rise for a 2nd Month.
• If you are looking to take advantage of these all-time historic low rates by purchasing your dream home, feel free to give me call. Additionally, if you want to know if you qualify for Government tax credits by purchasing a new home in California or qualify as a first-time home buyer and get up to $18,000 in tax credits, the timing could not be any better.
• Oh, By The Way... If you know of someone thinking of purchasing, refinancing, prequalifying, divorcing and needing loan options, 1031 Exchange, Investing Using Your IRA, lowering their rate through a federal loan modification, buying foreclosures (FHA loans) or short sales, please let me know. I will be happy to follow up and tend to their needs.

Sincerely,

Susana Cohen
and RE/MAX Palos Verdes Realty Team
"Keeping It Honest" - Leading the way to help you make smart, informed decisions.