Desert real estate forecast for 2012, part 2
Last week I was banging the drum for Buyers to get off the sidelines and into the game by providing my opinion of the desert real estate market for 2012. Here are my final points:
3) RENT vs. OWN- Remember when Gordon Gekko told us “greed is good”? Landlords are rising to the call! The good news, if you are an investor, is the forecast for this year is for rents to increase. Why is this greedy? If I have $100,000 in the bank I am earning about $2,000 in interest. If I buy a $100,000 home with the money and rent it out for $1,000 a month I receive $12,000 for my investment. Let’s say it cost me three or four grand in expenses I still net eight or nine grand before taxes. This is a great investment. Greed is where I try to increase that rent to $1200 a month!
The good news is for Buyers! In today’s market I can buy a pretty nice home for around $100,000. My payments including principle, interest, taxes, and insurance will be around $725 a month. Add in my tax savings for my mortgage interest and I am way a head of the game. Using the $1,000 a month example for a renter we can see a savings of $275 a month versus renting. Another $100 a month in tax savings. Add to this that at some point the investment should appreciate, you will have pride of ownership, and you have a guard against greedy landlords! This is the year to make your move. As the banks clear the inventory and people go back to work demand will increase in the market. 2012 is most likely the bottom.
4) Election and mortgage rates- It appears from all angles that interest rates will remain low throughout the year. The Fed’s have committed to holding rates down and this should stay the same for mortgage rates. The Election is where we have to keep our focus. I am looking for our current administration to take one more stab at the housing market. There is a looming settlement with the major banks over their foreclosure process. What if the Feds ratcheted back their time requirements for borrowers who have had a foreclosure from 3 to 5 years to 2? Think of how many potential Buyers would become available! Remember the $8,000 tax credit for first time buyers? I am looking for President Obama to increase his stock by helping Americans buy again.
2012 promises to be another exciting year for our industry. It’s a great time to invest in the market. Give us a call and let’s talk about your goals and how we can help you attain them.
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