2010 Forecast…Get into the game!!!
My strong recommendation for the coming year for both Homeowner/Buyers and Investor/Buyers is GET OFF THE SIDE LINES AND INTO THE GAME! For several reasons that I will outline below now is the time to buy and invest. Let’s look at why I feel so strongly about this recommendation:
1) At this time, until April, the federal government will give you $8,000 to purchase a home! This program will most likely not be renewed for a third time. This is an incredible deal and all Buyers should take advantage of it!
2) Interest rates are between 5% and 5.50%. It is expected that the rates will climb to finish the next New Year (2011) over 6%. I personally believe they could finish over 6.50%!
3) The banks have worked with almost every homeowner in default on their loan. Either they worked it out or are about to work it out. In any case, there are thousands of homes that are finishing the foreclosure process. Expect to see these homes hit the market in the first half of the New Year. Bank owned homes (REO) tend to sell on the lower end of market prices. In addition, here in California, there is a push to speed up the short sale process. Combined REO and short sale opportunities will create the lowest prices we have seen since the early 1990’s. How low is a different discussion. Our experience shows us that good properties get picked up quickly. It is a far better decision to purchase now and get what you want (and financed at a low interest rate) than to wait to see if you can save another 3%!
4) Inflation is on its way! Many of you have not experienced the nightmare of Inflation! Those of us that were around in the late ’70s and early ’80s can’t forget it! It does not take a rocket scientist to see that the only way for the Feds to pay back their debt is to reduce the value of the debt. Look for the Feds to ease their grip on interest rates by late in the year (see #2). Many of us are already showing concern over inflation. Google reports a sharp spike in the number of searches for “Hyperinflation”. A consumer confidence survey, published by The Conference Board, shows Americans expect prices to climb a troubling 5.1% over the next 12 months! One of the best ways to protect yourself from inflation is to have fixed rate debt. Imagine how protected you will feel if you have purchased a home at under replacement cost and with a fixed, low interest loan!
5) Today you are buying below the replacement cost of the property! In our area the average sale price of a single family home is below $75 per square foot. Most contractors tell me that they would charge between $90 to $100 per square foot to build a home on your lot. Add another $10 per square foot for the lot cost and you can see that you are purchasing at 25% to 30% below replacement cost. What a great deal!
6) For Investors, the rate of return from rental income is far above what you can get in the bank. Taking into consideration #4 above, now is the time to invest! Even if you cut the rent below the current market and pay a property management company to manage the property, most likely you will have a positive return. And this is before you factor the tax advantage and the appreciation value of the investment.
Any of the Realtor’s at AFG Realty (760.369.2347) would be happy to explain and expand on the points listed above. We recommend Ms. Debbie Rogers at Allied Home Mortgage (760.832.1159) for financing help and advice. Our partner company, AAA Property Management (760.369.1221), can answer questions related to property management cost. As you can see from above, Now is the time to get into the game!
We here at AFG Realty wish you the most successful New Year!
Bob Armstrong
Broker
AFG Realty
