I started my career in home construction and real estate in 1978. At that time home sales were brisk and remained that way until the early 1980’s when mortgage interest went up to as high as 18%. Talk about a challenge, try convincing someone that 18% was a good rate to pay for a home loan.
High interest rates, high unemployment, and high inflation eventually bought the real estate market to a grinding halt. The Carter years were a disaster to the American economy. Now, fast forward to 2011. Today, 9-13-11, you can get a 15 year mortgage for 3.33%, if you have good credit. In North Carolina you can buy a new 2000 square foot home for around $200,000.
If you borrowed $180,000 for 15 years at 3.33%, your payments, principle and interest, would be around $1271.81. You can rent a 2000 square foot home for a comparable amount, so which way should you go? In my opinion, if you are going to live in a home only 2 years you would want to consider renting. If you are going to be in a home longer than 2 years buying might be the better option.
We all know that in the long-term real estate prices will go up. History has proven this time and time again. But nobody knows when the trend back up will begin. It might be a few more years before the sub-prime meltdown plays out, but it will eventually work out and home prices will start to rise again. How long do I think it will be before real estate starts tracking back up. This is a complicated question and the real answer is no one knows. In some states it might be 5 years or more. It will largely depend on how long it takes to absorb the REO (Bank-Owned Foreclosures) and short sales in any particular state. REO’s and Short Sales bring down the values of homes so until most of these are cleared out of the market I don’t see prices rising.
In my market, New Bern NC, I think it will be about 2-3 more years. I am basing this on the number of REO’s and Short Sales that I see on the market, the amount of new homes sold, the prices they are selling for, and the total of existing homes being sold. Some might say I have lost my mind but I say today is a great time to buy a house. Why would I say this? Because home prices are reasonable and interest rates are stupid low.
Me, I am putting my money where my mouth is. I have purchased 2 homes already this year and have my eyes open for another deal. Everyone talks about the poor real estate market. On that point I will completely disagree, if you are a buyer. For buyers I have never seen a better market!