Wednesday, January 25, 2012

Common sense and the real estate market

I just talked with a past client, who mentioned something that I’ve heard a lot recently. He told me that his income had increased, and he wanted to move into a better home for his wife and him, but since selling prices have fallen, he just won’t do it. “I can’t take the hit and lose that much money at this time,” he said.

I love my clients and friends; they’re wonderful people, and many are experts in their respective fields of study and work. But some are not economists or business people, and haven’t thought these things through. Their reasoning just doesn’t make sense. Please allow me to explain.

As an example, let’s assume you want to move from a $300,000 home into a nicer $500,000 home. Let’s move back ten years to when the values of homes were increasing. If you bought the $300,000 home in 2001, and the market value over the next five years increased 10%, you’d sell your home at that time for about $330,000, profiting about $30,000. If you then bought the $500,000 replacement home five years later in 2006, it too would have increased in value the same 10%. You’d have paid about $550,000, and lost about $50,000 over that same period.

Looking at the big picture, you spent about $20,000 in order to own that nicer home.

Returning to our current market, if you had bought a home five years ago from today for $300,000, and the market value decreased 10% during that time, you’ll sell your existing home for around $270,000, losing about $30,000. When you buy the replacement $500,000 home, it will have decreased the same 10%, allowing you to pay only $450,000, and thereby saving you about $50,000.

That big picture now will have made you $20,000, rather than having spent it.

So the question must be asked: Would you rather have made the move five years ago, when the market was so good that you lost $20,000, or today when the market has fallen to the point where you make $20,000?

I ignored the closing costs because they’re pretty close to the same in either case. Much lower interest rates today make this example even better for you.

Like I said, I love my clients. I want them to benefit in owning their homes and investments.

So shouldn’t we all be moving about now?

Call me as you need. I’m always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.541.1920 office
303.859.4467 mobile
mmoger@wkre.com
www.MikeMoger.com

Whether or not to buy or sell has nothing to do with the market.

I’ve sold real estate for decades, and one thing I know is that people don’t take the decision to buy a home lightly. They think it through. I’ve always said that Home is not a little thing; it’s a big thing.

I also know that perception is reality. If someone thinks something is true, it’s true.

I write today to question something that some people are thinking is true, but is not necessarily correct. That is the notion that no one should buy a house today. I hear it all the time. “The housing market is in crisis. Buying real estate today would be foolish.”

It is true that real estate, in addition to being your home, is an investment. It may increase in value, and it may not. It may even fall. Ask a whole lot of people in California, Florida, Michigan, Arizona and Nevada. Some of those places where values skyrocketed in the past decade have seen those values fall considerably.

In truth, about 35 counties in the entire country have lost a significant percentage of their values over the past four years. Most of the rest of the nation is fine. We forget sometimes that real estate values are like the weather. You can’t write a forecast for the country. I’d love to know that people just quit watching the Today Show. It’s not the same here in Boulder County, Colorado as it is in Phoenix.

But more importantly, people are missing another truth. The transaction for the Buyer is different in a fundamental way from the transaction for the Seller. The Seller needs Price. The Buyer needs Cost.

Unless you’re buying your home using the One Easy Payment Plan (all cash), cost will impact you much more than the selling price. You may pay for that home for thirty years, and the interest rate will impact tremendously what you pay over that time. Lower interest rates will make your new home cost oftentimes $100,000’s less than if interest rates were higher.

As I write this, interest rates are about 4.00%, 30 year fixed rate for good, qualified Buyers, the lowest in the history of our country and its economy. The reason? Losses in those 35 counties have created a housing crisis, and interest rates are a component of the greater economy. Unlike the weather, they actually are the same across the country. The foolishness of the largest mortgage banks and investment houses, the policies of the governments of the world, and massive buy-in by the American people over the past twenty years have all conspired to create for you one of the best opportunities in your lifetime to own the home that you really want.

Buying real estate today would be foolish? Really?

Just the facts. The whole and honest truth. You won’t hear that on the Today Show.

Call me if you need.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.859.4467 mobile
303.541.1920 office
mmoger@wkre.com
www.MikeMoger.com

Monday, January 23, 2012

I can't afford to sell? Think it through.

I just talked with a past client, who mentioned something that I’ve heard a lot recently. He told me that his income had increased, and he wanted to move into a better home for his wife and him, but since selling prices have fallen, he just won’t do it. “I can’t take the hit and lose that much money at this time,” he said.

I love my clients and friends; they’re wonderful people, and many are experts in their respective fields of study and work. But some are not economists or business people, and haven’t thought these things through. Their reasoning just doesn’t make sense. Please allow me to explain.

As an example, let’s assume you want to move from a $300,000 home into a nicer $500,000 home.

Let’s move back ten years to when the values of homes were increasing. If you bought the $300,000 home in 2001, and the market value over the next five years increased 10%, you’d sell your home at that time for about $330,000, profiting about $30,000. If you then bought the $500,000 replacement home five years later in 2006, it too would have increased in value the same 10%. You’d have paid about $550,000, and lost about $50,000 over that same period. Looking at the big picture, you spent about $20,000 in order to own that nicer home.

Returning to our current market, if you had bought a home five years ago from today for $300,000, and the market value decreased 10% during that time, you’ll sell your existing home for around $270,000, losing about $30,000. When you buy the replacement $500,000 home, it will have decreased the same 10%, allowing you to pay only $450,000, and thereby saving you about $50,000. That big picture now will have made you $20,000, rather than having spent it.

So the question must be asked: Would you rather have made the move five years ago, when the market was so good that you lost $20,000, or today when the market has fallen to the point where you make $20,000?

I ignored the closing costs because they’re pretty close to the same in either case. Much lower interest rates today make this example even better for you.

Like I said, I love my clients. I want them to benefit in owning their homes and investments.

So shouldn’t we all be moving about now?

Call me as you need. I’m always here for you.

Enjoy the day,
Mike Moger
Wright Kingdom Real Estate
303.859.4467 mobile
303.541.1920 office
mmoger@wkre.com
www.MikeMoger.com