Thursday, September 08, 2016
I belong to a Worldwide CEO group called Vistage International, and have been involved with this group since 2003. My group consists of 14 CEO’s from a vast variety of industries. We rode the good times in the early days and we rode the downturn together. While a few didn’t make it, most survived, albeit weaker than we started, but smarter nevertheless. I share this with you because lately, my group has been leery that the real estate market is showing signs of repeating the sins of the past that created the Boom that led to the Bust.
Being intimately familiar with both the Boom and the Bust in Real Estate, I’m here to tell you that what we’re now experiencing in Real Estate is far from what got us to the Boom/Bust of the mid 2000’s. Please allow me to take you back to the early 2000’s.
- NINJA Loans were prevalent (No Income, No Job, No Assets). An unqualified buyer could “lie” on a loan application and get a loan. This is far from the case today. Today, No Income, No Job, No Assets = No Loan Today!
- Appraisers could run rampant. Loan Officers had “pet appraisers” who would mysteriously arrive at the contract amount. Not the case today. Heck, the Loan Officer and Real Estate Agent are not even allowed to speak to the Appraiser anymore, much less choose who they’ll be. Today appraisers are randomly selected from a rotation pool which is controlled by an appraisal management company.
- You could buy a home for $300,000 and “flip” it the day of closing for $375,000. Not Today. Most government loans have a minimum 90-day hold policy.
- New Home Construction was nearly double the pace it currently is.
- Negative Amortization Loans were plentiful – These don’t exist today.
- Prices were rising at record rates, some reaching 20% annually – Today, many markets are flat, while others have modest 3% to 5% appreciation year over year. Remember, Real Estate is Hyper-Local – There is no National, State or County wide market. Heck, we can drill down to types of homes in a subdivision that have different market characteristics.
I bring this topic up this month, quite honestly, because I’m tired of hearing that we’re recreating the past with incentives and low interest rates. It wasn’t incentives and low interest rates that created the bubble. It was caused by loose lending policies. And we do not have those today.
My advice: buy as much home as you can and finance as much as you can at today’s generationally low interest rates. Rest assured, a bank won’t lend you the money if they’re not darn sure you can repay it. One day in the future, when interest rates go back to normal, you’ll be looking like a Rock Star with your fixed rate loan in the 3+% rate.
Curious what your property is worth? Our exclusive Strategic Market Analysis (SPA) allows YOU to pick a price according to your personal motivation to sell and, of course, we’ll educate you on the supply of homes in your market. And it’s free, without any obligation. Who knows, your home may be worth more than you think!
If you or someone you know is thinking about taking advantage of this rising real estate market and super low long-term mortgage rates: Please, give us a call and let us demonstrate how our system provides better results and a more pleasant experience.
Until next time, may you have fair weather and following seas!
Craig J. Beggins, President
CENTURY 21 Beggins Enterprises