Kathleen Philippsborn
Personal Service, Professional Standards
360.672.1512 Cell / whidbeyhomes@yahoo.com
IS OPPORTUNITY KNOCKING??
Look, I understand . . . the events of the last three years have left all of us a bit shell-shocked. Real estate decisions used to be pretty straight-forward; How much house can I afford? How long will we be living here? What do the local sales and rental markets look like? Now there's all this uncertainty! It seems there are as many different forecasts as there are forecasters [ Housing Experts ].
But here's what I'm telling my customers. IT'S TIME TO COME OUT OF THE BUNKER. The shooting has stopped. However, the landscape has changed. You have to look at things a bit differently. It's tougher than it used to be; there's more risk involved. But there are some potentially life-changing opportunities out there for the folks brave enough to test the waters while everyone else is still frozen with indecision. And the repercussions of doing nothing while the economic landscape shifts beneath your feet could be as severe as doing something and having it turn out badly. So what do you do?
As I've consistently argued on this page, when it comes to real estate, I believe that you need to ignore the static, stick to the basics, and concentrate on what you know, on what's real. My clients are confident that they're armed with the most comprehensive, up-to-date information available pertaining to the Whidbey Island housing and property market. Remember: National statistics don't mean a thing if you're trying to decide whether to buy or sell property on Whidbey Island. Location, location, location! It's true in an up market; it's true in a down market. What happens in L.A. or Detroit, or even Seattle doesn't mean a whole lot with regard to real estate in Coupeville, Freeland, Langley, Greenbank, Clinton, and Oak Harbor. Here's what I think you need to consider:
(1) The overall economy - A lot of the major indicators (stock market, consumer confidence, GDP, even car sales and airline load factors) are positive, with the exception of employment [ Unemployment Statistics ], which tends to lag a turnaround by 6-12 months (people seem to have forgotten that). Most experts are no longer anticipating a "double-dip" recession. The reason it matters? Because once the economy looks to be self-sustaining, the Fed will stop keeping interest rates artificially low, so inflation doesn't get out of control. The betting on Wall Street is that this will start to happen 2nd or 3rd quarter of this year. Mortgage rates are already rising . . .
(2) Mortgage rates - How much house you can afford depends almost as much on mortgage interest rates as it does on the purchase price. A 1% increase in rates adds about 19% to the cost of a home. For example, at 5% interest, you can borrow $200,000 and end up with a P&I of about $1,073 on a 30-year fixed mortgage. But if rates go up to just 6%, and that's all the monthly payment your budget allows, you'd only be able to borrow $179,000. After 10 years in the
house, you'd have paid over $8,000 more in finance charges and have around $8,100 less in paid-off principal. So how high could mortgage rates go? It looks like the low was mid-November of last year; Most bankers [ MBA Forecast ] see rates rising slightly (to 5-5½%) over the rest of 2011. Long term? I've added the graph at right for a little perspective. Could a weakening dollar and trillion-dollar-plus federal deficits eventually push mortgage interest back up into double digits? I don't know the answer, but it's certainly something to think about.
(3) The national housing picture - You have to separate this from our local situation, but there are some 18.4 million homes vacant across the U.S., including unsold inventory, bankruptcies, and foreclosures. Obviously, it's a buyer's market out there with average prices likely to stay level, or even decline, for a while. A recent Case-Shiller Graph (remember, it shows rate of change, not average price) is shown at right (use Ctrl + to zoom in if you need to). But here's what Warren Buffet thinks [ Buffet on Housing ].(4) The local housing market - One thing hasn't changed in real estate: It's still location, location, location. We know that the real estate business on Whidbey Island has picked up dramatically over the last year. I see it at Whidbey Properties, I see it at other agencies, I see it in the lists of pending sales and closings, and I'm seeing prices starting to stabilize. A few sellers are even fielding multiple offers. Prices here on the Island, in general, didn't drop as dramatically as in many other areas because there was never really that much of a bubble to burst, and the Island's major employers, NAS Whidbey, Nichols Brothers' shipyard and Boeing, are all doing well. The Growlers will help at the North end of the Island; Boeing's new KC-46A tanker contract should spur demand at the South end.
(5) Your ability to get a loan - Things have gone from one extreme to the other. Used to be, all you needed was a pulse (and even that wasn't always required). Lending institutions got burned; they're under close scrutiny and are dotting every "i," crossing every "t." Even if Fannie Mae and Freddie Mac survive, they will be severely curtailed. Getting a loan these days is a combination IRS audit, TSA inspection and colonoscopy. Don't even think about wasting time looking at properties without getting pre-qualified to see if you can get a loan, and for how much. But it's not impossible; just tortuous. If you've got a banker you like and trust, great! If not, I can hook you up.
What do you think? Well, if you're an optimist, this is an historic opportunity to buy a house or land because property prices are down, the economy is recovering, and interest rates are on the way up. Remember, shrewd investors typically get rich by spotting opportunities where others only see the risks, and by being willing to going against the grain. Want a great example? The investors who got into the stock market after it tanked, starting in late 2008, have seen the Dow go up 60% over the last 2 years while everyone else was waiting to see if the Bull Market was for real. Most ordinary folks don't jump in until after the trend is well-established, only getting in when the party's almost over. And if you're a p
essimist? Owning a home is a great hedge against inflation. Dr. Marc Faber, the highly-respected financial consultant (also known as "Dr. Doom") who foresees severe problems ahead for the U.S. economy, recommends buying tangible assets, such as real estate, to protect your wealth from a decline in the dollar.
essimist? Owning a home is a great hedge against inflation. Dr. Marc Faber, the highly-respected financial consultant (also known as "Dr. Doom") who foresees severe problems ahead for the U.S. economy, recommends buying tangible assets, such as real estate, to protect your wealth from a decline in the dollar.
There are never any guarantees in real estate, but by having a real estate professional (like, say, ME) in your corner, by sticking to what we know and being diligent about running the numbers, you can make an informed decision based on facts rather than speculation, guesswork, opinion and emotion. I can't tell you what to do (my lawyer's pretty specific on that point), but I can make sure you're asking the right questions, provide you with solid data, and help you figure out what's right for you and your family. Call me. Let's talk.
