Real Estate Investing

There has been plenty of bad economic, housing, and financial news in this last year to last me the next 20 years.  I’m sorry for  the millions of people who’ve lost jobs and homes, as well as for those whose constant struggle is to make ends meet.  But maybe this recession - possible depression - gives us a new perspective.

Sharon (aka SistaSmiff) wrote a post recently over at her place on the web.  She lost what was supposed to be a dream job right before Christmas and it took several months for her to land back on her feet - a challenge for anyone, but especially for a woman with three kids to support.  With her new job, she’s learned what others have gone through as they share training classes together … from deployment in Iraq to having previously owned a finance company.

The thought has occurred to me this week listening to my co-workers tell their stories of struggle and trying to figure out what to do in these lean times and the constant news reports of how bad the economy is, all the people losing their jobs, etc….and this may sound weird but I think it’s probably good that we’re going through this Recession/Pre-Depression/Whatever You Wanna Call It. 

I don’t know what I’m trying to say and I’m certainly not an expert on talking about the dang economy and all that, but, I think maybe it’s good for the people of my generation to experience this stuff.

I tend to agree that this is teaching all of us how to save our money, how to choose wisely what we do spend our earnings on, and how to prepare more meals for eating at home than dining out.  When our kids see that belt-tightening is a craft, it will hopefully be a lesson they’ll learn to help them get through their own lifetime of trials and tribulations.

It’s important to put things in perspective, to find a silver lining.  If you plan to live in your home for a long time, this drop in home values should not be harmful to you and your financial well being.  Charlene Kimmel, a real estate agent in Nashville, pointed out that even with this economy homes increased in value by 64 percent in this area over the last 10 years.

… an investment of $201,211 in a home in Middle Tennessee in 1998 brought an average value of $329,065 in 2008!  … [she continued] The Feds have just lifted their self-imposed limit of 4 investment properties per person, so now Investors have more options and opportunity!

If you bought in the last three years, your return will most likely not be there if you sell today.  However if you can stay put for a few more years, home values will climb back up.  Hopefully as the prices get better this time around it won’t be mad growth, but a steady sensible climb.

Let’s learn from our past mistakes.  At least enough so that new generations will remember the importance of saving, scrimping, and living frugally.  Spend money, but be careful to not spend outrageously.  And keep things in perspective.  Home prices will eventually recover, but it may take a few years.  Hold steady if you’re able.  Remember if you can’t, your credit will eventually recover.

Photo by me.  My cooking is usually abysmal so this is proof that sometimes I do succeed in the kitchen.

Google may be entering the mortgage business.  This will give Zillow and other online mortgage giants a run for their money, but I still maintain my stand that it’s always better to find someone local who knows the area, knows the market, and knows the agent so they don’t dare add on unnecessary fees to close.

Check out the latest celebrity real estate activity here.

Realtor Jack from Evanston, Illinois commented on an article about short-sales messing up the housing market in Chicago.  His numbers didn’t add up the same as what’s apparently happening in the Windy City.  This bring us to the absolute truth that all real estate is local.  In one city on the outskirts of Nashville, short-sales, bank-owned, and HUD housing made up 30-35% of properties listed.  In other areas, less than 1% are distress sales.  The homeowners in the high foreclosure community have been hit really hard and are struggling simply to get showings, but other townships are still fairly healthy.  Remember, location location location when you buy!

Speaking of short sales, the Bloodhoundblog has a great post about investors buying these properties.

But the truth is, speculators are the garbage collectors of capitalism. They come in and clean up messes they did not create, returning productive value to underperforming assets.

It you’re looking for a villain in these stories, look to the borrower, to the lender or just to the vicissitudes of life. But it is the speculators who are going to bring the real estate market back to a viable state.

Finally, Shakhammer recently posted a video of the trials and tribulations a customer went through to buy and install his own water heater.  It IS a long video, but gives the Sears Company some strong, logical advice.  (I hope this link works today!)

[youtube=http://www.youtube.com/watch?v=YF4CqjvSCmA]

Photo from Huffington Post.

The news media is all over a story today from Fannie Mae reporting that homes are falling in value to 9 percent this year, 2 percent lower than the first-anticipated 7 percent freefall.

The bad news is perception is everything. When the news only reports that home values are plunging without balancing it with good news, the alarm the public feels is very real. However, mortgage rates are still incredibly low and there is an expectation that they’ll go lower, so not all is lost.

If you’re looking to sell your home in this market, it’s true that it’ll go for less than what it could’ve sold for this time last year. However - and this is important - if you’re looking to sell and buy another home, you’ll make up the difference in the home you buy. Plus, you will likely be paying a much lower interest rate to boot.

Why wouldn’t it be a good time to buy? Cost of living increases (a gallon of milk in Kauai, Hawaii goes for $10, while it’s only $8 p/gallon in Honolulu!!) sure have me wigged out so stepping into a big mortgage may be worrisome. Also, with gas prices rocketing faster than the Discovery space shuttle… we all worry.

However, it is still key to remember that this too shall pass and when it does, the growth in your home equity will be well-worth the leap of faith that our economy is solid enough to bounce back strongly in another year.