Beyond the Media – National Home Values

April 4, 2011


The housing market still faces many challenges. High unemployment, foreclosures and other distress sales are keeping negative pressure on prices. This of course is good news if you are looking to buy as low rates and lower prices have brought affordability to record levels.

How Affordable? -Since 1963, it has cost an average of approximately 43% of ‘per capita’ or individual income to finance the cost of a median priced home (20% down payment and prevailing 30 year fixed rate mortgage). Right now, it’s only about half of that cost at approximately 22%.

Are you holding off on a purchase for fear that prices might fall further? – Chances are that some sellers might be thinking the same thing. If you’re smart about it, you can use that as an advantage to strike the best possible deal on a home today for once sellers believe that prices have bottomed or are going back up, your advantage will be gone.

 Rates are low today, who knows about tomorrow? – Gambling on the expectation of a lower price tomorrow at the risk of higher rates can cost much more in the long run than locking in a sure thing today. Ex. $200,000 30 Yr. fixed loan @ 5% = $1073/mo. today vs. $180,000 @ 7% = $1197 per month later.

Own, Rent or Borrow – One way or another, a home is something we all need every day. The numbers here tell the story and it’s no secret that values have fallen, yet over time, that’s not the case. As you can see by the chart, values over the last 10 years show very healthy appreciation. Can you say the same thing about stocks over the same period?

 We don’t get a history lesson in the news because the news is about the moment and the more dramatic the better. That’s what sells advertising and that’s how they get paid. For the rest of us, taking a rational, longer term view of things makes more sense. This is particularly true when it comes to a home, for this is something we are likely to own for many years rather than just moments.


Lease to Own – A Great Short-Term Solution

December 23, 2008

By Brian Short, CMC, CRMS, GMA 

A long-time friend of mine called me this week about his desire to help first-time home owners or troubled borrowers get into a house of their own – even when mortgage loan options are at their lowest for the past 30 years. 

house-for-saleThere is a glut of inventory on the Real Estate market, streets lined with motivated sellers, nearly unprecedented low interest rates and complexes full of renters who want to get out and start something for themselves.  These prospective home owners want their chance to build home equity, experience the freedom which comes from home ownership and to move out on their own. 

What is the solution: Investors buying discounted houses at fire-sale prices, with rock bottom interest rates and then selling them to prospective buyers with a lease-to-own arrangement.

I still contend that an insurgency of Real Estate investors are the ones best qualified to pull the Real Estate market out of its 18-24 month tail spin. 


 There is money to be made in Real Estate even in 2009! 


1. Historically low fixed interest rates available even to those who will not live in the houses they might be buying.

2. Historically high number of homes on the Real Estate market needing to be sold by very motivated sellers – most of these homes are still in great shape and need little or no fixing up!

3. Historically high number of recent high school or college grads, newly married, or those who have recently had a child who have come to expect that they should be able to buy a house when they move out on their own.

With the recent lowering of the price of gas and the upcoming change of administration in Washington DC, many will be sensing a renewed interest in moving past the rough times of 2007-2008 and be interested in exploring home ownership. 

As I explained to a friend yesterday, all current mortgage loan programs will require 3-5% down payment for any buyer who desires to buy a house in this market.  No mortgage company will be able to change that scenario for the time being. 

Therefore, those who have not saved up their down payment or have glitches on their credit or employment history need time to let those characteristics heal.  A lease-to-own arrangement with a seller is a great way for them to put down some roots, build up some payment history, develop a longer track record on their job and work at paying off or cleaning up some past debt obligations necessary for qualifying for long-term institutional financing.

I have spent hours over the past ten years counseling prospective borrowers who desire to buy a house on my step-by-step plan to pull them out of their specific situation to prepare them for long-term financing.  Most people can be successful with this uniquely tailored plan in 2-3 years as long as they have steady income throughout that time period and remain firmly committed to bettering themselves and righting many of the wrongs of their past.

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