In the past week, I have spend several hours researching the real estate market. I always like to read up on Real Estate because such a large part of our economy is determined by the real estate market.
I’ve spoken with people at the regional real estate associations, looked at the number of ALT A and Option ARMs a nd Commercial Loans coming due over the next 3 years and even taken a couple trips to some of the major markets outside of my area to become better informed. This is the advice I am taking and what I would or wouldn’t do if I were making decisions with regard to Real Estate.
(Note: I sold my last property in Jan 07 and am currently renting)
Things I would do:
1. If you don’t own a property, continue to rent for the foreseeable future.
2. If you are considering a 7 or 12-month lease, offer to sign one for 15- 18-months if the landlord is willing to take an additional 10,15% off the rent.
3. If you are looking for a great deal, I would wait another 12-18 months as the overall trajectory will be down for at least another 2-3 years. Remember, real estate corrects in waves that take years due to the lack of liquidity in the markets.
4. If you own a property that is unaffordable, I would contact your bank and set and IN PERSON appointment to re-negotiate the terms of your mortgage. It is crucial that you go in person to do this and bring your current sources of income and outstanding bills. You need to show the bank officer your personal situation and explain to them, that unless your terms are changed, you may have to default on your mortgage.
Things I would not do:
1-I would not sit in a home that is clearly overvalued while I was waiting for the real estate market to bounce back. The trajectory is down for now.
2- I would not just walk away from my mortgage without at least attempting to re-negotiate the terms with my bank. (See #4 above) It has almost become a national past time to just walk away (unannounced) from your home. I understand this may seem ok because “everyone else” is doing it however, this could come back to hurt you later, especially is legislation is put in place to protect banks.
3- I wouldn’t spend too much time blaming myself for paying too high a price for my home over the last 3 years. There is plenty of blame to go around regarding the real estate market crash. The best thing to do is learn where you may have overlooked certain things (like paying more than 30-40% of your existing income toward your housing expense) take personal responsibility and pledge to make a better decision in the future.
Real Estate will be correcting for the next 3-5 years in my estimation. These are some of the things I would do based on my assessment of the market. I hope you find them interesting and please share your personal situation and things you are doing.
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