Interesting post today over at Paul Kedrosky's Infectious Greed. In it, mortgage lender Tom Vanderwell lays out his "7 things (in random order) that I think everyone who is looking to buy or sell in today's market needs to know."
Check out the full post here.
1. 6 months ago is ancient history. What your neighbor sold his house for 6 months ago doesn't matter. What the seller was asking for the house 6 months ago doesn't matter. What matters is what the market will support today.
2. Don't worry so much about what you paid for your house. Instead, look at the difference between what you can expect to sell your house for and what it's going to cost you to buy the new one that you want. I expect you'll find that those are much more important numbers (unless you end up without any equity, in which case you don't sell).
3. Now is not the time for do-it-yourselfers. When the inventory levels are, depending on property type and area, anywhere from twice as much as is healthy (single family homes near my hometown) to 750% as much inventory as there should be (condos in Florida, from what I've heard), you need to find a professional to help you navigate the markets and get your house noticed. I'm not, frankly, just talking about calling the Realtor who sold the house up the street. I'm talking about calling a high-caliber professional who knows what it takes and can really give your house the attention that it needs. . . .
4. Any interest rate that starts with a 6 is a good number. From 1971 to 1998, we did not see any mortgage rates that started with a 6. Frankly, we've gotten spoiled in an era of cheap credit and we need to keep things in perspective.
5. There is a Tangible Difference in working with a true mortgage professional. I'm not talking about the difference between a mortgage broker...or a mortgage lender at a bank (like yours truly). I'm talking about the difference between someone who can help you navigate the changing environment that we're in. Read The Tangible Difference and you'll see what I mean.
6. Don't buy a house today if you aren't going to stay there at least 7 years. That's right, a mortgage lender is telling you that if you don't have at least a 7 year time frame in mind, you shouldn't buy a house right now. Why? It's all about the math. If the market drops another 5% over the next year and then stays the same for two years, it's going to take 7 years for you to recoup the 5% loss and then build up enough to pay the 6% Realtor's fees when you sell and make a little profit too. Long term, the value of real estate investments is very solid, but this market has spread things out a bit longer.
7. It really is a good time to buy a house. No, I'm not turning into a National Association of Realtors choir boy. If you go into the transaction with the right mindset (long-term investment), with a talented group of professionals (Realtor, lender, inspector and accountant) backing you up, and you remain analytical about the financials and keep the emotions from forcing decisions, I firmly believe that you'll find yourself very glad that you made the move you made. Is it the right time for everyone to buy and sell? Nope, but I have the feeling that there are a lot of people sitting on the sidelines because they are scared of what the mainstream media has done to the portrayal of the markets and are missing out on some great opportunities to move forward and upward.