I read a long article this morning that actually covered quite a few angles on this issue. Is It Time To Buy Real Estate by Vicki Gerson. It’s worth reading, it reiterates some points we’ve (myself and commenters) made on this blog in prior posts. And of course I don’t agree with everything they say.
One of the bankers answers the question about who should buy by saying that dual income families should buy. What do I say? Maybe! Other factors come into play – what is your credit situation, how much money do you spend on other things every month? Just because you have two incomes doesn’t mean a home purchase is a good idea at this point in time.
And sadly the article doesn’t seem to ever interview anyone who says buy if you want a home to live in for a while. A few people infer that, but no one says it. They do say this is not a market for flipping. (this is a national article but that is one area that applies to NE Ohio — this is NOT a flip this house market).
One of the loan consultants says this is a good time to buy high end properties because they are for sale at lower market values.
The National Assn of Realtors says that by the end of the year the market will start an upturn. I’m not in that camp; I think by the end of the year it could stabilize but not seeing any indication that prices will start to swing up in 2008.
I stick to my original suggestions. If you can afford to buy a home and want to be a homeowner then talk to a mortgage broker and find out what your comfort level is regarding a monthly payment on a home. And buy a home because you want to live in it and keep it for a while. Or buy an investment second property with the intention of keeping it for a while. Don’t buy it if you don’t think you can live in the same home in three years. It’s just common sense. The good news is, I’ve got 8 sets of buyers so have seen a lot of housing inventory over the past two months. There are good solid homes for sale. Here is a quote from the article:
“….Kaiser warns that potential home-buyers must not get in over their heads. They should feel comfortable with their mortgages and be confident they can handle the payments along with taxes and insurance….”
Peace Out - 3C
0 responses so far ↓
1 Elaine Reese // Apr 18, 2008 at 12:30 pm
Excellent commentary. When did people get away from buying homes because they just want to live in their “own place” and have a backyard for the kids or pets, or dig in their own gardens, or talk to their neighbors over the backyard fence.
Maybe people have watched too many of those flipping infomercials.
2 Carole Cohen // Apr 18, 2008 at 7:37 pm
That was always the draw to me, Elaine. While stocks go up and down, you live in your home for years and enjoy a still somewhat more stable investment of money while having shelter over your head.
3 Sharon // Apr 19, 2008 at 8:34 am
Me too. Home ownership in and of itself was our goal from the beginning. Our home isn’t grand but we have great memories here and after work I love coming “home.” I agree too many “flip my home” programs have us losing our sense of what home needs to be.
Sharon’s last blog post..To Commute or Not to Commute
4 Henry Reardon // Apr 19, 2008 at 8:37 am
One of the biggest problems in NE Ohio is oversupply of housing, especially in Cuyahoga County. We have a strong downward move in population, and yet the number of housing units available continues. The result: excess supply.
If the County, its citizens and real estate agents want to see prices increase anytime soon (and by that I mean that I do not see a meaningful upturn in median valuations for another 2 – 3 years), they are going to have to start removing supply from the pool of homes.
There are countless communities with ailing housing stock that need to be demolished and re-greened: Lakewood, Cleveland Heights, Cleveland, East Cleveland, South Euclid, University Heights, Shaker Heights, Maple Heights, Bedford; The list goes on.
Remove excess supply and not only do you correct the supply/demand ratio, but you also improve living conditions and overall property valuations around those removed homes, if done properly. Increased valuations equal increased property taxes, which should offset any decline in property tax income from removing the property to begin with (aggregate, over the long run). In fact, most of these abandoned properties are already delinquent in tax payments, so its hard to even consider it a loss of tax revenue.
5 Carole Cohen // Apr 19, 2008 at 9:33 am
Sharon, I can easily tell by your writings that you have a sense of place about you – thanks for commenting.
Harold – I know there was a movement afoot to change the laws in a way that allow governments to take possession of properties – at least the City of Cleveland was pursuing this. Currently there is quite a lag time because of the need to try every method to notify the owners. And of course there is the cost involved in any demolition. But yes, we don’t have the population numbers to find someone for every vacant or abandoned home. Thanks for commenting.
6 Lou // Apr 20, 2008 at 10:11 am
Carole,
On point, as always. As for comfort level of purchasing, we tell our clients to be very careful about a couple things. When going to a mortgage broker (careful), make sure that there is a complete understand of what has gotten you to that comfortable monthly mortgage payment. What were the up front fees and was that the best use of your finances? What is included (or more importantly, what is not included such as taxes and insurance) with your payment? And, finally, is your comfort level fixed, if not, when will it change and what is the maximum increase? (oh, I forget, variable rate means that it COULD go down).
As for timing, during our pre-purchase education clinics, we have been telling our clients that yes, now is a good time to by if: If you put down enough to make credit less expensive. The homeowner should provide a financial commitment or “skin in the game” at the time of purchase. If credit has been repaired or focused on to make credit accessible. We are finding that the pendulum has swung to the opposite extreme of offering everyone access to capital to credit being as tight as, well, let’s just say really tight. And this is not just for low-down payment, low to moderate income homeowners, but to everyone purchasing a home (or effecting their HELOC). And finally, if you have a full understanding of the process, those at the table and their interests and finally there should not be a hesitation to ask for help whether through a HUD certified counseling agency (you do not have to be at a certain income level for us to help you) or if you have the finances, a lawyer to look out for your best interests.
Henry is on point too. It would seem odd that housing prices in the Greater Cleveland area continued to rise (not necessarily this year, but for the past few years) when population and demand decreased and supply increased. Adam Smith would be scratching his head. Would this mean that there could have been continued inflation of appraisals? Stripping of more than just the equity that was in the home, but stripping of the success of sustainable homeownership?
Well, that’s my 2 cents this morning. Time to go back and watch Handy Manny with the little one.
7 Carole Cohen // Apr 20, 2008 at 10:51 am
Lou I so love the way you explain the process. When you talked about ‘understanding what got you to that comfort level’ – glad you focused on that because it’s SO true and I bet most people don’t really analyze this.
‘Skin In The Game’ also makes sense to me. I had a client ask me yesterday why since they can do FHA or conventional loan, why should they go conventional. And they have good money saved up for a down payment. That’s ‘skin’ and comfort level rolled up into one.
Your response to Henry’s comment gave me a V8 moment – supply/demand, less population, how the heck COULD we have had more appreciation without more fudging of appraisals. Thank you for your illuminating comments, Lou.
And I see I miss a lot not having young children – Handy Manny? lolol Why am I thinking of Tim Allen?
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