Is there ANYTHING that slows or stops the real estate recovery? Some thoughts
Is there anything that slows down or stops the real estate recovery?
I personally believe the answer is yes! Does not mean I think we are heading for a crash or anything real negative. I think it is not realistic in the areas I service to believe the market is able to sustain such a dramatic upward only rise. Lets look at a few things that will be challenges or could be potential challenges.
Interest rates rising?
We have experienced the lowest level of interest rates in my lifetime. There is no way to go truthfully but up. It does not have to be a major increase to have a major affect on the market. Why is that? Mainly because property values (in areas I service) are up 10% to 25% in the last 12 months! If you factor a rising interest rate into the equation, the house that you qualified for at three hundred thousand may have a value on it currently of $350,000. The rise in rates may mean although you were qualified for $300,000 and are keeping your payment at a certain level, to keep that level you need to be at a sales price of $275,000. What does that mean? Well it means the home in the area that you are qualified for and payment you are comfortable in NO LONGER EXISTS!
The Mortgage Debit Relief Act is expiring
This may be a VERY big deal! If you are unaware the mortgage debit relief act allows homeowners that sell a property in a short sale NO tax consequences for the difference of the sales price versus the amount owed on the property AND the lender MUST AGREE to forgive the debit and not come after the homeowner later. An example: Your home sells for $300,000, but you OWE $500,000 on it. That creates a $200,000 difference. You POTENTIALLY have exposure to TAX on $200,000 AND the lender LATER could come after the homeowner for additional monies on the loss! YES part of the negotiation of the short sale may STILL allow you to be forgiven, BUT with the economy improving, sales in real estate improving, and prices rising it is very possible the government does NOT extend the bill. I believe THIS really would change the market because of the amount of people in trouble in their homes AND underwater with no ability to sell without it being a short sale!
Doom and Gloom?
Not all. Selling real estate the last 26 years, one thing I know it is change is constant. We will have change and the market will fluctuate. I believe real estate is the best investment a person may make, but I believe in informed decisions and not blind faith in your investing. Make sure you are doing the best you can for your family and you will be fine, no matter what the market is doing.