If you listen to the media you are probably thinking that I am crazy. The truth is
that now is a great time to buy or sell a home in Grosse Pointe. Don't let the
negative media attention about the "mortgage meltdown" and falling home
prices keep you from listing your home and pursuing a new one.
First of all, the mortgage industry woes are primarily limited to the sub prime
loans and other types of creative and comparatively risky financial products.
While the mortgage industry stalled briefly to reconsider its more exotic loans,
there is still plenty of conventional financing available for qualified home
buyers. Interest rates remain at historically low levels - less than 6% with
some lenders for the typical 30 year fixed rate mortgage. As far as falling home
prices, everybody wants to know how low they will go and if they should wait.
Well it is quite possible that they may have already hit bottom in some areas of
Grosse Pointe. All the sold signs around town are a pretty good indicator of
that. If buyers thought the prices were going to fall considerably more that
wouldn't be the case.
Even if prices fall slightly more, there is a good chance that you still may be
way ahead considering all the factors. For starters, there is no such thing as a
national real estate market. All real estate markets are local and driven by local
factors that include the local economy, housing supply and demand factors
and other attributes such as geography. Remember the Grosse Pointe real
estate market was well in decline while California and Florida's market were
still booming. My grandfather used to say that when Michigan sneezed, the rest
of the country caught a cold. He also used to say that Michigan is usually the
first to fall into the mess and usually the first to crawl out. If you look at
Michigan's economic history, both saying hold true. Yes, it is still a gamble to
enter the real estate market at this time, but a gamble that can and most likely
will, pay off big in your favor.
Consider this, say your present house is worth $300,000, but as a result of the
market you must accept an offer 10% below that at $270,000 to sell it quickly.
You are now at a loss of $30,000. Now consider you bought the house 10
years ago and paid $150,000, you are sill ahead $120,000. Now lets add in
the savings of your new house. Lets look at the worst and best case scenario.
First the worst case scenario:
The home you are looking to purchase is $500,000, and the sellers are
not in any hurry to move but are willing to take 10% less making it
$450,000. This would mean you have saved $50,000. So you lost $30,000
but you saved $50,000 and that now puts you ahead by $20,000.
Now lets look at a best case scenario and where the gamble could really pay
Again, lets say the home you are looking to purchase is $500,000and is in
foreclosure or the sellers have already moved and are desperate to sell.
You go in with a low ball offer of $390,000 knowing that they will most
likely counter but at least you will know their bottom line. If it is a
foreclosure, you may be surprised and the bank may accept , especially
if you are a strong buyer and can close quickly. For now though, lets say
they counter at $400,000 - a $100,000 saving! Now subtract the loss on
your present house of $30,00 and that leaves you ahead by $70,000. Your
gamble just paid off and if you got in at the right time and qualified for a
loan at 6% or below, you have really come out ahead!
Still not convinced and think you want to wait a little longer? Well waiting could
cost you more than you think. You may still be able to find a great deal on a
new home in a few months, but look at the differences among purchase prices
versus interest rates:
If you put 20% down and qualify for an 80% loan, here are your principal
and interest payments on the following purchase prices:
$425,000 Sale Price at 8.25% Interest - Your Payment $2554
$450,000 Sale Price at 7.75% Interest - Your Payment $2579
$475,000 Sale Price at 7.25% Interest - Your Payment $2592
$500,000 Sale Price at 6.75% Interest - Your Payment $2594
$525,000 Sale Price at 6.25% Interest - Your Payment $2586
The payments are almost identical. However, the home you can afford to buy at
8.25% is $100,000 less than the home you can afford to buy at 6.25%. If you
decide to wait and see exactly where the market is headed and housing prices
and/or interest rates rise you could lose big.
A good strategy is to do your homework and weigh all the pros and cons
before making a decision to buy or sell. Don't panic over newspaper
headlines, make an informed decision and run your own numbers.
|Now is a Great Time to Buy or Sell a Home in
|1030 Yorkshire, GPP
2350 sq ft - 3 Bedroom, 2 1/2 Bath