Archive for October, 2008
This just might be the optimal time to buy a home in Phoenix
This is my column for this week from the Arizona Republic (permanent link).
This just might be the optimal time to buy a home in Phoenix
Who should be buying residential real estate in Phoenix right now?
If you have been planning to buy a home sometime soon, and if you know for certain that you won’t need to sell it for at least five years, this just might be your magic moment.
Interest rates are still deliciously low, but both current events and long term trends suggest they’re headed higher. You’ll probably have to sell your current home for less than you wanted to, but you’ll be buying your next home at a bargain-basement price.
Sadly, you may not have enough equity in your home to move up. But if you do, there are some amazing homes out there selling for unheard-of prices. Houses that sold for $375,000 in 2005 are going for $175,000 three years later.
If you do have substantial equity in your home, even at today’s prices, moving up now may make a lot of sense. The rules for the capital gains exclusion on primary homes change on January 1st. If you’ve been in your home for more than the last 24 months but fewer than the last 60 months, moving before the end of the year could save you a significant amount of money on your taxes.
It makes sense to me for college students and their parents to snap up condominiums and starter-homes while prices are so low. After the start of the year, if the student holds title, it will take five years to realize the full benefit of the capital gains exclusion — approximately the length of a college career.
First-time home-buyers are taking advantage of this market, as well, with low-down-payment or even nothing-down government-sponsored loans.
Who else should be buying? Investors, of course, but the smart ones have already figured that out. For now, it’s very easy to acquire a premium home in a commuter-friendly suburb that will be cash-flow positive from the first tenant. Investor loans can be hard to obtain, but prices are so low that many investors are simply paying cash.
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No commentsOther types of credit may be feeling the crunch, but home mortgages are still readily available
This is my column for this week from the Arizona Republic (permanent link).
Other types of credit may be feeling the crunch, but home mortgages are still readily available
Bad news about the economy is coming in from all directions, so you may be in the mood for some good news: There is plenty of money available for home loans.
By taking over FannieMae and FreddieMac, the federal government has essentially nationalized the secondary mortgage market. The lenders themselves are still private entities, but the government’s loan guarantees are viewed as being so strong that, by now, virtually all residential real estate loans are coming through Fannie, Freddie, the FHA or the VA.
The other way of saying the same thing: There is virtually no secondary mortgage market left for non-conforming or sub-prime loans.
So while you may have trouble getting new car financing or a loan for your business, you should have no problem getting a home loan — if you qualify and if the amount you’re borrowing falls within the limits set by the four government agencies guaranteeing home loans.
And there’s the rub: For most of the Phoenix area, qualifying for a conforming loan should be no problem. But higher-priced homes are sold with non-conforming “jumbo” loans, which are difficult to obtain right now and come at much higher interest rates.
Using an FHA loan, it is still possible to buy a home with “nothing down.” FHA borrowers are obliged to pay a 3.5% down payment, but this can be offset by the $7,500 tax credit incorporated in the mortgage relief bill passed in July. FHA borrowers can ask the seller for up to 6% in closing costs, so they can take possession of the home for no money out of pocket.
But there’s a catch: To obtain an FHA loan, the home will have to pass a rigorous FHA appraisal, which will eliminate many foreclosed homes unless the seller is willing to correct the most serious defects.
All that notwithstanding, while the financial sky might be roiling with dark clouds, real estate is still a silver lining. Because of the government’s loan guarantees, lenders are willing to take risks on homes loans much more readily than on other types of credit.
Technorati Tags: arizona, arizona real estate, phoenix, phoenix real estate, real estate, real estate marketing
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