Real Estate’s Silver Lining- 12/16/07
Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC
Real Estate’s Silver Lining
“Real Estate’s Silver Lining”
Open any major publication or tune into any national news program and you’ll be bombarded with negative stories about the real estate housing market in America. There’s no question that the subprime lending debacle is a major event because major financial institutions fell victim to greed supported by poor lending practices. Inevitably, all this negative press affects the mood and outlook of the general public…turning massive numbers of people into pessimistic viewers of the future. However, it’s worth considering whether there’s another story or even a variation of the subprime news headlines. There are two sides to every story and there’s a silver lining in any difficult situation. It is true that the problems in the subprime market are real. For those of you who are not familiar with the term, subprime loans are loans made to people whose credit is sub-par. The trouble began as mortgage lenders offered loans that required little or no money down and payment plans that included interest only or, in some cases, less than interest only, called negative amortization loans. Loans often included ‘teaser’ rates…interest rates below prevailing market rates. What the mortgage lenders counted on was continuous rising home values that would bail out home buyers and cover the lending institution’s risks. But, the lenders’ bet did not pay off and has cost them millions or billions of dollars and left hundreds of thousands of new homeowners in financial peril as their mortgage payments rise under their adjustable rate plans. The subprime market is clearly in difficulty but what about the rest of the real estate market? If you have real estate but don’t have time to manage it then contact property management experts at pyramiscompany.com.
“The media often paints an accurate but broad-brush picture…akin to a national weather forecast. However, weather is local in nature and the real estate fundamentals for the Birmingham area remain strong”, says Ty Dodge, President and COO of Realty South, Alabama’s largest real estate sales company.
“From a historical perspective, appreciation of real estate in san diego coastal will likely be the second or third best year in Birmingham for real estate sales”, Mr. Dodge adds. Home prices remain fairly stable; unemployment is among the lowest rate in the country; and mortgage rates are extremely competitive. “For people who should have been buying homes all along, it’s still a good time to buy”, says Matt Bearden of 1st American Bank. Current mortgage rates for both a 30-year and 15-year mortgage range from 5.25% to 5.75%, near historical lows.
For those of you who are considering buying a new home, now may be one of the best buying opportunities. “I can’t remember a time in my 33 years as a homebuilder where there was more selection and such affordable prices as right now…and as is bound to happen in the not too distant future, the pendulum will start swinging the other way…meaning decreased selection and increased home prices,” states Ed Anderson, Vice President of Gibson & Anderson Construction.
So let’s review the positives:
Employment and the economy remain strong in Birmingham.
Mortgage rates remain near historical lows.
Home prices remain stable in the Birmingham area.
If you are a buyer, you have great selection across virtually all of the Birmingham area communities.
These same facts are true for many communities throughout the United States. Check your ‘local weather’. You may just find a rosy forecast for buying real estate right now.