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People tend to think that when the market is down, they should do nothing, and wait until the market goes back up before they make a move. While that might make sense if you are “cashing out”, that is not the case if you are moving “up” into a more expensive property.

Why?

Let’s use the following example:
Your current house, House A, was worth $300,000 at the peak of the market.
Your “move up” house, House B, was worth $500,000 at the peak of the market.

So, to keep the math easy, let’s now say that the market is down 20%.
– House A is now worth 20% less, or $240,000 (20% of $300,000 is $60,000)
– House B is now worth 20% less, or $400,000 (20% of $500,000 is $100,000)

Here is the point: House A lost $60k, House B lost $100k. The difference between the two is $40,000. You actually SAVE/MAKE $40k by making the move BEFORE the market goes back up. Yes, you are losing $60k on your current house, but you “making” $100k on the new house. Why wait to pay $100,000 more for your new house?

AND, we haven’t looked at interest rates yet, which can make things even more expensive. Stay tuned!

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I just gave a speech on this topic, and actually, another way to say this is:

You can’t afford not to buy real estate right now.

I know this sounds like a sales pitch, and technically I am a salesperson, but being “salesy” is not my genetic makeup (that’s my wife – just don’t tell her I said that).

Seriously, there are three very good facts about why it makes sense to buy real estate RIGHT NOW.

First Time Home Buyers – Everyone has heard this right now, but if you are  first time home buyer, or you have not owned a home for less than 3 years, you can get $8,000 back from the IRS.  This is not a loan, this is an ACTUAL cash credit.   Why is this important:  the median sales price for a home in the Denver Metro area this yea is $195,000.  So the IRS is giving you 4% of the purchase price in cash to buy the house.  You only need 3 1/2% for a down payment, so essentially you can be getting a half a point back for buying your own home.  Need I say any more?

The other major factors to buy now are:

It always makes financial sense to MOVE UP in a down market.  So, you want that 3 car garage, or the house with a view, or the extra bed and bath for when you have visitors.  Whatever the reason, I will go through why this mathematically makes sense.

 Interest Rates affect your Purchasing Power, and interest rates are still at historic lows.  Every 1% change in interest rate fluctuation is equal to 10% purchasing power.  If the rates go up 1%, you just lost 10% of your purchasing power.

My next two posts will look into these two items in more detail

Surprising, but the average sales price has bounced up in the Castle Rock zip codes.
As of 7/22/2009 - zip codes 80104,80108,80109

As of 7/22/2009 - zip codes 80104,80108,80109

I don’t have a specific explanation, but my overall sense is that the higher priced properties have softened on price, there have been distresses properties in the higher priced ranges that buyers have begun to take advantage of, and possibly a slowing of lower priced distressed properties.

Direct from the horse’s mouth: how you qualify and can receive the first time homebuyer credit.

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

The Federal Housing Administration (FHA) is working to monetize the $8,000 tax credit that is available to first time home buyers.

If they can figure out how to do this, new home buyers will be able to use that $8,000 NOW, when they purchase their home. Since a buyer needs 3 1/2 percent for down payment when using FHA loans, that $8,000 can be the 3.5% up to a $225,000 purchase.

Read details at: http://www.latimes.com/business/la-fi-harney24-2009may24,0,6944417.story

According to one of my local mortgage associates, Fannie & Freddie have changed their lending standards for non-owner occupied properties.

Not only must investors come up with the 20-30% down but now the investor/buyer must have 6 months of P.I.T.I. in liquid reserves (retirement accounts don’t qualify).

What is this country coming to? Let’s incent the market on one hand (first time buyer credit of $8,000), but on the other let’s kill the investor market! These are not fix and flips, these are savvy people who believe in the value of buying and holding real estate, and now these people are getting punished!

What can I say? I am really frustrated by this…if anyone else has thoughts/ideas let me know…I am working to secure other sources of funding that don’t have this stringent requirement.

There is lots written about the stimulus bill for homebuyers, but here is the recap:

Time frame to buy:  by Dec 1, 2009 – settlement date must be by 12/1/09

First-time buyer: a buyer who has not owned a home for three years.

Married first-time buyer:  both buyers have not owned a home for three years.

Claim tax credit – Claim the tax credit on your federal income tax return.

Other form or forms – No other form except your federal income tax return.

Credit limits – Single, $74k, Married $150k

Tax credit pay back – You are not required to repay except for certain conditions.

Access the tax credit now – Consider changing your withholding numbers.

Loan credit – State housing finance agencies to help buyers at closing by advancing the credit amount as a loan.

 

NOTE:  Buyers should speak with a tax advisor or other professionals.  I am not a tax authority, nor should the above statements be relied upon solely in making home purchasing decisions.

When combined with a HUD home purchase, new home buyers could get into a new home for $100!  I have seen many HUD homes in Centennial, Highlands Ranch, and Parker.