With less than 2 weeks until Christmas, a new year is right around the corner. As we’re putting the finishing touches on one of the wildest years ever, and planning for next year, I’ve got real estate on my mind.
Here are 6 real estate mistakes people will make in 2009 – and how to avoid them.
1. Missing out on Freebies
When someone offers you something for nothing with no strings attached (and his name is Uncle Sam), please accept.
The federal government has shown a knack for pushing through unlikely legislation in times of uncertainty. Your mileage may vary, but the Housing and Economic Recovery Act of 2008, which was passed in July, includes a little-known nugget authorizing a $7,500 tax credit for first-time home buyers. An even lesser-known bit is that you don’t literally have to be a first time home buyer to qualify. That’s right, you could purchase your first or 47th house before July 1, 2009 and so long as you have not owned a principal residence in the three years prior to the purchase, you too can qualify for the tax credit that works like an interest free loan paid back over fifteen years. Do me a favor and read that again and then tell everyone you know. It’s too good to keep secret.
2. “They aren’t making loans anymore”
Untrue. It might be more correct to say that they aren’t making loans to people with bad credit, no money, no job, and essentially no ability to repay. The truth is it is harder to get a loan than it was a few years ago – and rightfully so. Turns out “fogging a mirror” is not a sound form of qualifying a borrower.
3. “It’s going to be a buyer’s market for a long time”
This is a biggie. The mistake here is not whether or not you know when the market will balance out or shift to a seller’s market, but thinking that you should wait for it to do so. Is it going to be a buyer’s market for a long time? Who knows? Everyone has an opinion, but the fact is that it is a buyer’s market today. Do you want to be a buyer in a buyer’s market or a seller’s market?
4. “Prices will go down further”
Like it’s ugly cousin #3, this one is a mistake because by the time you get invited to the party, it’s over (Wouldn’t it be nice if a memo was issued 30-60 days before the bottom). Unless you’re thinking of flipping (please think again), you know that real estate is a solid long-term investment. If it happens to go down another few points before going back up, does it affect you if you’re not cashing out? Again, if you wait and buy in an appreciating market, sellers will be much less open to negotiating and choices will be fewer.
5. Missing out on killer interest rates
Holy moly. I hold in my hands a rate sheet I received earlier this week from a local mortgage broker with a 30 year fixed rate of 4.875%. US Treasury bonds have been going gangbusters, pushing the yield down to crazy, historic lows. When investors start dabbling in riskier investments again, will these rates still be around? I don’t know, but I do know if your rate starts with a 4 you’re looking good. And remember the rule of thumb: When interest rates go up one percent, your purchasing power goes down ten percent.
6. Looking for the next worst thing
This is a pet peeve of mine, so stop me if I drift into rant mode. I just have this to ask: Are we tired yet of being on DEFCON 1, always on the lookout for the next worst thing? Whether it’s checking our retirement accounts every 13 seconds, or fixating on CNN’s scrolling ticker of doom, we just couldn’t seem to get enough this year.
What we focus on tends to expand. And there’s still only 24 hours in a day. The more time we spend on things we can’t control, the less time we have left to spend on things we can control. How many positive things might you have missed while focusing on the negative in 2008?
…and how to avoid them
Here some useful ways to avoid making these real estate mistakes in 2009 (links included!).
Stay up on interest rates – Freddie Mac Weekly Primary Mortgage Market Survey reports national average interest rates every week. A summary can be found on the front page of Bullhead City Blog. These are national averages. Looking for current rates? Here’s a link to one of the big guys. I suggest you talk to a local lender for accurate and personalized information.
Freebies – Learn more about the First Time Home buyer Tax Credit from National Association of Home Builders. There very well may be more incentives coming in 2009. Talk to your REALTOR about new or pending changes.
Monitor local real estate trends and statistics – Remember there is no “national real estate market.” The best way to empower yourself is to stay up on the local market. Check out Bullhead City Blog for current market information, subscribe to receive updates, or download The Informant for free.
The common denominator
You may have picked up on it by now. The key to avoiding these 6 real estate mistakes is to arm yourself with reliable information. Opportunity is abound. Surely there are lots more mistakes to dodge, but avoiding these 6 mistakes will help you make informed, responsible, and profitable decisions in 2009.
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Excellent post. Am going to share…
Thanks Todd!
Hopefully we can spread the word on the first-time buyer credit. Combine that with super low interest rates, affordable prices, and many homes to choose from. What a great opportunity.