We have all read the headlines, “The Housing Market Has Officially Begun To Recover”, “The Recession is Officially Over”, only to have our hopeful attitudes dampered by headlines such as, “100% Chance of Global Recession”, “Housing Market has Yet to Reach the Bottom”, and with a puzzled look we ask each other, “So which is it? Should I or should I not invest in a home?” If I had a dollar every time someone asked me how the housing market was doing or what I thought about the market recovery I would have enough money that I wouldn’t have to work for a while. It is a really complicated subject and the honest truth is, I don’t know. I don’t know where our economy will be at this time next year.
Why Invest Now?
Right now many people are fearful of investing in real estate because of the uncertainty of the housing market as well as the global economy. But, despite the headlines and the fear of the ever crashing housing market, if you can afford it, real estate can provide for a positive long term investment. Most markets have plenty of affordable properties, interest rates remain historically low, and with homeownership rates declining, the market for rentals is increasingly strong. Although it may take a few years to see a return on your investment you will be allotted a solid income for many years to come.
Rents are rising and the mortgage rates have fallen to very low levels. With the low interest rates and the lower home prices one could be spending the same on a mortgage that they are on a rental. When you own you can write off the interest you are paying on your home resulting in a larger tax refund. Typically, here in Southern California, the average price for a single family rental home is about $1800 per month and that is on the lower end. So instead of throwing away $21000 per year on a rental you can spend $21000 per year on mortgage payments and gain equity that you can recoup when you sell the property.
Where is the Market Headed?
The lack of available homes is driving the home prices up and prospective home buyers find themselves in bidding wars with other homebuyers or investors. Many people who bought at the top of the market are underwater in their mortgages but refrain from selling because. They can't get the price they need to sell and are therefore not bothering to put their homes on the market in hopes the market will come back.
Foreclosures rates have showed some signs of leveling off but many warn that an increase of foreclosures is highly likely. According to CoreLogic, a real estate research firm, since the start of the financial crisis nearly 3.7 million homes have been foreclosed upon, how many remain in the shadow inventory is relatively unknown. Lenders who participated in Fannie Mae or Freddie Mac loans are required to report data regarding how much inventory is left off the market, other lenders are not required to do so, thus making it difficult to know exactly what is still out there. Some of these homes are stuck in the foreclosure process and others the banks have decided against releasing in efforts to not flood the market.
If the banks were to release more of their foreclosed inventory and flood the market, prices would be driven even lower. Right now the demand for homes is much greater than the supply resulting in the infamous bidding wars. These bidding wars are driving up the home prices but not to the point that they were a few years ago.
The global economy is still in a dire state with excessively high rates of unemployment and a recovery is not likely to happen with a bad economy. Not only are the higher standards required for home loans making it harder for people to be approved but many potential homebuyers are very wary of borrowing large sums of money to purchase an asset that will be harder to sell and that has the potential to drop in value.
So, although the housing prices have halted in their rapid downward spiral they still continue to slowly fall. How far will they drop? Have we reached the bottom? What next? If you tried to Google the infamous question “When will the housing market in California return” you will come across several different opinions and headlines. No one knows for sure how long it is going to take for our economy to recover, all one can do is speculate and predict. Does this mean that investing in a home is not a good idea? If you are one of the fortunate ones with steady employment and you can afford it then of course now is the PERFECT time to buy. With the increase in the cost of renting and the low interest rates why not buy now.
On the other end, if you are one of those that has equity in your home and wish to sell then now is a GREAT time to sell as well. You might not get what you could have had 5 years ago but you can also buy what you couldn’t 5 years ago. If you wait for the price of your home to go up then the price of that larger home you want will go up in price as well.
So is the market in a state of recovery? Are we really headed for a larger global recession? Have the unemployment rates really dropped? These are only some of the questions I myself ask, people ask me and I often overhear others talking about. Do we know the answers for sure? No, I don’t believe that we truly know the answers to most things. Investments of any kind not without any risks but with patience those risk can reap a larger reward in the long run. But I will without a doubt tell you that if you can afford it then Yes! Now is a great time to invest in real estate. If you have equity in your home and wish to sell then Yes! Now would be a great time to sell!
Anna Rogers is a member of an award winning team at Exit Realty SCV, one of the areas fastest growing real estate firms in the Santa Clarita Valley. Working with both buyers and sellers in the Santa Clarita, San Fernando Valley’s and surrounding areas, I will work tirelessly to ensure all your real estate needs are met. I look forward to talking with you and helping your home buying and selling be a smooth transaction.
Anna Rogers 
818.688.1882
http://www.buyandsellscvhomes.com/
annarogersre@gmail.com
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