Okay, so things are scary out there. You can’t open a paper, turn on the t.v. or listen to the radio without hearing doom and gloom news. Layoffs, no one is shopping, increasing unemployment, the stock market fluctuates wildly. But, since people are scared and aren’t buying much of anything, it is the perfect time to buy real estate. As Warren Buffet once said, “…attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Reasons now is the time to be greedy:
- Interest rates are at an all time low . Rates on a 30-year mortgage are currently below 5%, the lowest they have been since Freddie Mac started tracking the data in 1971. The average rates dropped to 4.96 percent.
- There is more inventory now than there has been in years. There are currently over 15,000 single family homes and 23,000 condos in Miami-Dade County in all price ranges listed on the MLS.
- Prices have gone down significantly . The median priced home in Miami-Dade County in January 2007 was $390,000. At the end of December 2008, it was $225,000. The average price per square foot has dropped during that same time period from $248 per square foot to $162 per square foot. Condos median price in January 2007 was $260,000 and in December 2008 down to $165,000. The price per square foot has dropped from $302 to $225.
- First-time home buyers credit up to $7,500 only applies to purchases made before July 1, 2009. This credit, which is really more of an interest-free loan that must be repaid in equal installments over a 15 year period, is 10% of the purchase price of the home up to $7,500. The credit reduces your tax bill, or increases your refund, dollar for dollar. Since it is fully refundable, the credit is paid out even if you don’t owe any tax or if the credit is more than the tax you owe. To qualify, you must earn less than $95,000 a year if you are single or $170,000 if you are a couple filing jointly.
- Real estate appreciates over time . I know it is hard to believe in today’s market, but real estate has a tendency to appreciate over the years. If you plan to be in your home 5 years or more, you should buy now. For example: if you purchased a single family home in Miami Dade County in January 2002 at the then median price of $155,000 and were to have sold it at December 2008’s median price of $225,000, that is a 45% increase over 6 years! By comparison, on January 1, 2002 the Dow Jones was 10,021.60 . The close on January 15, 2009 was 8,212.49, a decrease of 18%.
- You can’t time the market. Individuals and investors alike have always tried to time markets, whether they are real estate, commodities or stock markets. The reality is that you by the time a trend is spotted, the peak or trough has already past.
- The number of sales increased in the last quarter of 2008. The number of sales in the MLS for single family homes increased 55% in the last 3 months of 2008 over the same time in 2007. Condo sales increased 43%.
- Inventory is starting to slowly decrease. From May 2008 through December 2008, we saw a slow but steady decrease in inventory in Miami-Dade condos for sale on the MLS. During that time, the inventory decreased by 9%. Granted, we still have a 38 months supply in all price ranges, but it is starting to decrease. During that same time period the decrease in inventory for single family homes was 12%.
For more information on why now is the perfect time to buy real estate read:
Easing Credit Market Brings Back Jumbo Mortgages and Low Down Payments
Is It Time To Be Fearful Or Greedy in the Real Estate Market
The Bottom of the Housing Market…Are We There Yet?