Our congratulations go out to Dan Kadlec, author of the February 2008 article in Time Magazine, which builds a case for why you should consider buying a home now.
http://www.time.com/time/magazine/article/0,9171,1713483,00.html
The article refers to a famous Money Manager, Peter Lynch whose most recent "Lynchism" today is this gem:
"Ignore the Headlines!" This is also the title of the article. Lynch observed in the magazine article, "in spite of all the great and minor calamities that have occurred..all the thousands of reasons that the world might be coming to an end-owning stocks has continued to be twice as rewarding as owning bonds."
Lynch goes on to explain that a top reason to not buy stocks is if you don't own a home-in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. In the article through a spokesman, Lynch reaffirmed the following views to the author of the article, Dan Kadlec:
"When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger, excel in the long run. As John D. Rockefeller famously said, "The way to make money is to buy when blood is running in the streets." "
While most would agree that real estate blood is not running in the streets of Houston, there also is no indication of home price deceleration in Houston, as is seen in many parts of the country. There is admittedly, very little home price appreciation. It is the calm before the storm. The President of the Houston-Galveston Area Council projected during a Fort Bend Chamber of Commerce meeting that by 2030, Houston will add population equivalent to the size of the City of Los Angeles and the council is preparing for that growth now. Growth and job opportunities in Houston will continue for some time and within the next 30 years, you can expect real estate to flourish along with that huge influx of population.
Even if the Greater Houston area does not experience that large of a population growth, one thing is inevitable - interest rates will rise within that time frame. The article says that "in the event the price of homes falls farther, most likely anything gained by waiting for a further drop in price might be offset by rising finance costs."
Dan Kadlec, the author gives a scenario of a home priced today at $218,900 where 20% is down payment and the interest rate is 5.5%, so the monthly payment is $994.31. If the home drops an additional 10% and the economy picks up, the Fed would start to raise the rates to 6%, and your monthly payment for the same house at a 10% lower price is now $994.94. "Their conclusion: If you wait a year to buy a home, you won't save anything and you spent a year living someplace you would rather not." Not a good scenario for homes in other parts of the country where home prices are projected to fall even farther. As for Houston, the situation could be far more serious. It is inevitable that interest rates will rise. Add to that fact another scenario - local area governments are projecting a huge growth in population for the metropolitan area. This will put pressure on housing demand and home prices almost always rise as a result.
We concur with the author and Peter Lynch that now is the time to capitalize on low interest rates and purchase now, as opposed to later when borrowing will cost more. However, add to that premise a population growth factor, and it gives those sitting on the fence a reason to lean on one they own.
Barbara Robin
Let Me WRK 4 U!
281-467-5013
