As I look back to the Fresno and Clovis real estate market around 2006 – 2007 ,
there was a buying spree that drove prices to new highs. And as we all know, what
followed impacted most of California and the country; it was called the “Great Recession.”
First houses stopped selling, followed by prices declining and then foreclosures began
piling up as never before in my generation.
Home owners who couldn’t afford there home or had to move began selling these upside
down properties through short sales, foreclosures or paying the difference out of there
personal assets. I too was caught with houses we were trying to sell or keep as rentals.
Today, those rentals are still upside down! Though there is no equity in these properties
they come close to breaking even as rentals, the financing on these properties made all the difference.
I can afford to wait until the market recovers.
The headlined article starts out warning Home-buyers not to buy as an investment.
I believe a big segment of the homes we have seen that have gone into foreclosure, the owners used
them as a bank account, i.e. saw them as a source of cash. Over an over again, we saw owners refinance
their home multiple times until the top of the market. Thus, they drained any equity from there homes
and added a higher mortgage payment. Mr Clement is right, you shouldn’t look at your home as an
investment, but enjoy the other benefits; being the owner, the tax deductions, having fixed payments,
the principle pay-down, and appreciation can be a huge benefit to most owners. For the most part these
benefits take time to become significant. And, when the loan is paid off, your monthly expenses go down significantly.
In contrast to a renter, you can expect your payments to increase incrementally through out your tenancy.
A couple of points Mr. Clements doesn’t address 1) you can use a loan to leverage your way into ownership
and then pay off the loan. For most of us, that’s the only way we could ever own a home. 2) if the market goes
up, your return can become significant, especially if you had s small down payment.
Another issue is the rent rate versus ownership. In today’s market with relatively low prices and even lower
interest rates, your payment as a buyer can be almost as low as renting. Thus, it could make sense to buy.
For those of you still wrestling with your home for any reason, we’d be happy to make you a fast offer….including
those in foreclosure, needing a short sale, a fast sale or simply have an ugly house.. Just hit the fast response button or give us a call.
Wishing you a meaningful 2015!