Sep 2, 2010

A Positive Spin on Housing

Tired of hearing all of the negative news on housing? I am.

There's no doubt the U.S. housing market and broader economy still face many challenges. In fact, you'd be a fool to ignore this reality. However, at a certain point, it becomes counterproductive to simply concentrate on any one aspect of any subject matter since allowing such one-sided concentration will begin to overshadow and ultimately suffocate other realities.

The discussion on many real estate and economic blogs this past week regarding the latest S&P Case-Shiller Housing Price Index report (released August 31, 2010) is a perfect example of such behavior. The S&P Case-Shiller housing report highlighted some positive numbers yet the analysis immediately shifted to warnings that these positive numbers where merely inflated by the federal tax credit incentive and the predicted second half slowdown would tell a much different, more negative, housing story. Even though I find myself in this more bearish camp, let's look at some other realities from a different perspective.

Despite it being quite apparent that prices have further to fall in many markets, U.S. housing prices have already tanked significantly. In many markets, current residential housing price points are dating back to 2000-2003 levels and you can find great buys dating back to early 1990 levels or beyond. Furthermore, mortgage interest rates are at historically low levels and may slip to even lower levels.

Keeping this in mind, there are reasons to be cautiously optimistic about what could be if you are an investor looking for cash flow opportunities, a first time home buyer looking for their first home, a vacation home hunter, or a private lender looking for strong returns on a low LTV deed of trust investment.

In an op-ed housing article titled, "A Dream House After All", Karl E. Case further illustrates these positive points:
Do the math. Four years ago, the monthly payment on a $300,000 house with 20 percent down and a mortgage rate of about 6.6 percent was $1,533. Today that $300,000 house would sell for $213,000 and a 30-year fixed-rate mortgage with 20 percent down would carry a rate of about 4.2 percent and a monthly payment of $833. In addition, the down payment would be $42,600 instead of $60,000.
Does this mean you should go out and buy? Of course not, like any other investment or major purchase, you have to do your homework and weigh the pro's and con's of what you're looking to do based on the circumstances you're confronted with. Even though it's quite clear that the U.S housing market and economy will cause further pain in the lives of countless Americans, there are positive opportunities and data points to take into consideration despite the constant negativity that abounds.

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