Kansas City Real Estate Thoughts...
Predicting the point at which the real estate market has bottomed out is an impossible task. Some economists think we are close and others think it will occur in 2009. The truth is none of them knows for sure. History has shown we will already be many months into a recovery before we even realize it is happening. So keep that in mind and know there are a lot of deals out there right now. If you believe we are remotely close to the bottom then it's time to dig deep and consider the risk/reward proposition at hand.
To me, the term "hitting bottom" has a national ring to it. But real estate is LOCAL and needs to be viewed with a local perspective when making the decision to buy or sell a home. If property values in a California subdivision have fallen 20% what is the significance of that on property values in my subdivision? Now if a market analysis shows that property values within my own subdivision have fallen 20% then we have a problem Houston. If property values in the subdivision next to mine have fallen 20%, I'd be sweating. If homes in the next city have lost 20%, I'd be taking note. You see your analysis of the situation needs to be done from the inside out, not the other way around. Also consider the incredibly low interest rates that are available today. If rates go up significantly, then the money you may save by waiting can be quickly lost. Here are a couple of examples to consider:
Scenario 1:
Prices decrease by 5% and interest rates increase by 0.5%.
Scenario 2:
Prices decrease by 10% and interest rates increase by 1.0%. | Today | Scenario 1 | Scenario 2 | Home Price $218, 900 | Home Price: -5% $207,955 | Home Price: -10% $197,010 | Interest Rates 6.04% | Interest Rates: +0.5% 6.54% | Interest Rates: +1.0% 7.04% | Monthly Payment $1,054 | Monthly Payment $1,056 | Monthly Payment $1,053 |
So if over a year's period rates jump from 6% to 7% then you need to purchase the home for 10% less to achieve a break even in regards to the monthly payment you'd make. So don't let today's bargains become missed opportunities - get out there and see the great buys that are available and when you find the right home your Realtor will help you analyze the specific community's market stats. Like every real estate downturn we've seen, there are going to be a lot buyers wishing they had swooped in to take advantage of the opportunity.
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