What Kind of Stuff are They Saying about Real Estate!!!!

 

 

” Peace cannot be achieved through violence, it can only be Attained through Understanding.”………Ralph Waldo Emerson

 

There is too much misinformation being spread about today’s real estate market. Studies are being misinterpreted. Prominent names are being used to foster a point even if their quote is from years ago.

As an example, we want to look at a story published last week by The Fiscal Times titled The New American Dream: Rent, Don’t Buy. In the article, they claim:

“Call it the Big Selloff—America is headed toward a future in which fewer people own the spaces they call home… Those trends are just the beginning.”

We are not arguing that the homeownership rate is under downward pressure in this country. We are disputing some of the ‘evidence’ used in the article. Here are three points we want to refute:

The Homeownership Rate IS NOT in a Freefall

The article quotes a Morgan Stanley study from July 2011 which did make the argument that the homeownership rate was trending downward. Many others made the same point at that time.  What the article failed to mention is that the homeownership rate unexpectedly increased in the third quarter of 2011! As DSNews reported in early November:

“After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report.”

The jury is still out as to whether the homeownership rate will continue to fall or whether it has already bottomed out.

The Founders of Case-Shiller ARE NOT Saying Renting is Better

In the article mentioned above, they claim that the team that founded the prestigious Case-Shiller Pricing Index believes that buying makes little sense. The article explains that back in 2006 Robert Shiller presented a study based on data collected prior to 2005 showing that, over time, it made more sense to rent than buy. They use this information to conclude:

 “Another skeptic is Yale economist Robert Shiller, co-creator of the Case-Shiller Home Price Index.”

They claim Shiller is a skeptic today based on what he said six years ago!

The major challenge we have with this is that Karl Case, the other founder of the Case Shiller Index, came out ten days ago saying that now is the time to buy. The New York Times in a story published on 12/30/2011 quotes Professor Case as saying:

“If you’re buying a house or apartment to live in and pay for over time, and can afford the payments, then it’s a terrific time to buy.”

Beracha and Johnson DID NOT Conclude That You Shouldn’t Buy

The Fiscal Times article went on to say:

“And in a paper this June in the journal Real Estate Economics, two researchers calculated that over the past 30 years, most often it would have been better to rent than buy.”

They were referring to a good study done by Beracha and Johnson titled Lessons from Over 30 Years of Buy versus Rent Decisions: Is the American Dream Always Wise? The paper does explain that over the last thirty years the financial benefits of buying vs. renting could be debated.

However, the conclusion of the paper left no room for argument. According to professors Beracha and Johnson, NOW IS THE TIME TO BUY!

“(F)undamental drivers now appear to be in place that favor homeownership over renting in the near term future…

“[This] might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting.”

They ended their research paper with this sentence:

“Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Dr. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research, is now a guest blogger on this site and in November shared with us his current presentation on this issue. To download the presentation, go to http://realestate.fiu.edu/buyer-or-renter-nation.html.

 

 

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Real Estate and Inflation

“Better to do something imperfectly than to do Nothing at all.”

 

 

 

We haven’t heard a lot about inflation recently.  However, prices have started to creep upward over the last year.  Let’s address the issue of inflation and the advantages of owning real estate.  The National Association of Realtors ( NAR) took a historic look at the impact of inflation.  Here are some inflation numbers over the past 30 years:

                   

We can see that real estate has fared very well.  The most important number is the $0 increase in mortgage amount.  The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.

NAR then looked at inflation moving forward over the next thirty years.  Obviously, if it remained the same as the last thirty years the percentage increase would be the same.  They looked at a low inflation scenario and a high inflation scenario.  The graph below shows the findings:

 

 

 

 

 

 

 

Bottom Line:

We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today.  Either would be a great hedge against future inflation.

 

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Captiva Cay….2088 Island Circle Weston, FL 33326

” Every thought we think is creating our Future.”

 

 

 

 

Come by and see this over 2,100 sq. foot home in the desirable Captiva Cay in Weston, FL.  This three bedroom, three full bath  home boasts open airy space.  The master bedroom is on the ground floor.  The two other bedrooms and full bath are on the second floor.  Beautiful landscaping and screened patio in backyard.  Newer roof and electrical fence for your pet.

This home is offered at $329,900.

 

 

 

 

 

 

 

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Broward County Property Appraiser ( www.bcpa.net)

” There is no telling how many miles you will have to run while chasing a Dream”. ….Author Unknown

My office had a meeting the other day and our guest speaker was Barika Williams from the Broward County Property Appraisals office.  She wanted to help us with our many questions regarding the appraisals and the information on the tax records.

Barika’s explanations on how the system works was very informative and helped us to understand better so we as consultants can pass this information on to our buyers and sellers. 

There is the “Trim Notice”  information that you should receive if you are a homeowner from the Appraisals office.  In this flyer you can get most of your questions answered and it explains the full tax notice line by line.

portability Tax is something you must apply.  Your taxes are not just automatically adjusted from one home to another.  Also homestead exemption is not just put on your taxes you must apply within a certain time period after you have closed on your home.  It does not transfer from one home to another. 

There are many ways you can save on your taxes.  The best way to get all your questions answered and to be saving as much money on your taxes you can is to go to their website.

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HOLISTIC FINANCIAL COUNSELING

“When I let go of what I am, I become what I might be.  When I let go of what I have, I receive what I need.”….   Tao Te Ching

 

 

 Holistic financial counseling – This focuses on a borrower’s entire financial situation and can prevent both foreclosures and re-defaults, according to a recent study sponsored by Florida-based special servicers, Outreach Financial Services.

I read this article regarding this program and wanted to share.  I have put in the links for you to get more information.  If this can help even one person it was worth my time to pass on.  Good luck!

Outreach Financial Services partners with the National Foundation for Credit Counseling, to provide holistic credit counseling to borrowers at risk of default.

 

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Jumbo Mortgages Changes…..

“We Cannot Direct The Wind But We Can Adjust The Sail.” 

Author Unknown   

                                  

Effective October 1, 2011, Fannie Mae and Freddie Mac lowered their conforming loan limits, going back to 2008 levels.  So what does that mean?  Many buyers suddenly need a jumbo loan to qualify for the home they want.  Making sure that your buyer has a good knowledgable  mortgage broker to guide them.

What makes a “JUMBO MORTGAGE” jumbo?  If the loan amount exceeds the maximum set by Fannie Mae and Freddie Mac, then the loan is deemed “nonconforming ” or “jumbo”.  For the highest-cost areas of the country, the maximum was $729,750 until October 1.  But now, it has been lowered to $625,000.  Moody’s analytics estimates that the highest-cost areas that will be most impacted by this change are in the Northeast, but some parts of Florida and Chicago areas will be affected as well.

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PRICE – vs – COST of a HOME…….

” If you can Image it, you can achieve it. If you can Dream it, you can Become it.” William Arthur Ward

                                                                                                                                                                 

 

There is a lot of research coming out showing that it makes great financial sense to purchase a home today.  Whether it be Rent vs Buy ratios, Income-to-Price ratios or Income -to-Mortgage payment ratios, purchasing a home now is a bargain compared to historic norms.  Now we want to look at the COST of a home today compared to peak prices.

According to the most recent S&P Shiller price index, residential real estate values have returned to 2003 prices.  Then when you factor in mortgage rates, the case for buying a home today  becomes even more compelling.

In 2003, 30 year mortgage rates were at 5.88%, Today they are at 4%.  How does that impact the actual COST of a home.  On a home purchased for $250,000, here is the monthly cost:

That means you save $285.30 a month, $3,423.60 a year and $102,708 over the life of a 30 year mortgage.  You buy the home for the same PRICE but the COST is over $100,000 less.

 

 

 

 

 

                                                                                                                                                                                              

 

 

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