Real Estate Remains Hot
Even though we continue to hear that the national housing market is slowing down, recent reports from Freddie Mac report that new home sales posted the biggest jump in 13 years in March 2006 and sales got a boost as builders cut prices to cope with higher mortgage rates and a growing backlog of houses on the market. The government reported that new homes sold at an annual rate of 1.21 million homes in March, up 13.8 percent from a revised 1.07 million pace in February. That easily topped forecasts for a 1.1 million pace that economists expected.
Home prices in the first quarter fell in several U.S. cities for the first time in at least 15 years, proof that the Federal Reserve is winning its campaign to cool off the nation's economy, including the housing market. But yet, the national median price for a home was up in the most recent reporting period. The National Association of Realtors said the median price for an existing single-family home in the U.S. actually rose 10 percent to $217,900 from $197,600 in the year-earlier quarter. Prices continue to increase but at a slower pace than in recent years.
In my new book, "How to Buy & Sell Real Estate for Financial Freedom," I outline various strategies that will help you buy or sell property wherever you happen to be in this country. There are a few steps you should always analyze before making your move, whether you find yourself in a sizzling hot or a frigid housing market.
Make sure you know what's happening in your local market. For example, I recently started seeing more and more For Sale signs stay up a little longer in my area. This might tell me that the inventory of existing or new homes is growing in my location. Maybe this indicates that the market is getting more competitive in my area thus leading me to prepare for the sale a little different than I normally would. Make some calls, pay attention to what's happening in your local real estate market.
Examine your personal financial resources and determine what you'll need to complete your real estate transaction. How much will you need for a down payment? How much can you afford to spend? What type of loan will you use? Determine whether it would be wiser for you to obtain a fixed-rate or adjustable-rate loan. A standard fixed-rate loan normally lasts for 30 years, but you can actually go for a 15-year mortgage to pay your home off faster, if that's your desire. Just make sure you know what you're buying. There have been a number of specialized mortgages created recently that many people can use effectively. Interest-only loans or the new 40-year mortgages can be very volatile. I even read in the paper the other day that a 50-year loan is being developed!
If you are purchasing an existing home, make certain you hire an experienced home inspector. I know many people who learned, through a home inspector, that their "new" home needed to have the roof replaced. The inspector cost them $300. The roof would have cost them $10,000! In my opinion, that's the best $300 ever spent.
There are so many great methods of investing in real estate, but you must be informed about your local market in terms of the real estate cycles. Not all strategies work the same way in every market. You just need to equip yourself with knowledge and tools to apply the correct strategy for your market. If you still have questions (and who doesn't) make sure you get your own copy of my new book, "How to Buy & Sell Real Estate for Financial Freedom," that my uncle, JW Dicks, and I recently put together with you in mind. Educate yourself and don't get caught in a negative real estate deal.
Originally published in the Outspoken e-newsletter.