Don’t wait for your perfect home, otherwise interest rates may squash your dream of ownership!

Philip A Raices

I hope all my readers had an enjoyable Memorial Day Weekend, even with the rain and remembered why we celebrate that day; my hat is off for all those that sacrificed their lives for the benefit of all our freedoms that we enjoy daily!

I see this every day, clients looking for that special or one of a kind home for them to buy. I know, you are constantly searching, probing, digging far and wide for your next “place to call home” but it hasn’t materialized just yet and frustration is beginning to take hold. Should we stop looking, stay in our current apartment or home and just go to a larger rental, upgrade or expand our current residence, since the kids are getting bigger and we need more space?

This was much easier, seven years ago, when the market was bottoming out and inventory was plentiful and prices were at their lowest! Some pulled the trigger and saw the opportunity and many sat back and did nothing due to “fear” (fanaticized-expectations-appearing-real).

Fast forward to 2018, beggars can’t be choosers in the current 30-year low in our inventory, due to a 35-year high in demand.

Many, many families and individuals waited and waited for a multitude of reasons, some understandable and most not! Even the boomerang crowd, who may have lost their home to bankruptcy, foreclosure or short sale situations, due to unaffordability, lost jobs or businesses, (discussed in my column two weeks ago), have come back in a frenzy to purchase once again!

My advice is to go out and find something to buy and reduce your wish list to a bare minimum. I promise you, that your financial future, will be in a much, much stronger and healthier position to build your wealth and not at the expense of you providing your current landlord with all the “spoils of ownership.”

All those write-offs, interest and real estate tax deductions (limited to a maximum of $10,000 per year S.A.L.T. -state and local taxes-  by our president’s new tax laws) increased value, and due to compounding, increasing your wealth over the long run, will be handed over to someone else.

Lastly, the security of knowing that you have control over whether or not you will have to move, because your landlord’s son, relative or friend will be moving in and he or she will not renew your lease or they are selling their home in this hot market and you have to move, in 30 days!
As many have realized and know, it’s a “no-brainer” that increasing your wealth begins with ownership of real estate, especially your own home.

However, I have seen the increased difficulty and frustration of buyers in gaining the necessary foothold.

As interest rates increase and inventory keeps decreasing, gaining the “ownership position, is eluding and escaping the reach of many; culminating in either staying put in their current rental, and making due or moving up to a larger apartment, as mentioned earlier. However, mortgage interest rates have escalated to the highest point in four years as per the National Association of Realtors so the cost of owning keeps increasing, and lack of inventory, is stopping many from purchasing!

Waiting is obviously, not the most advantageous decision and yes, I know, you haven’t been able to find that “special place to call home” yet, you hesitate to just purchase anything.

My advice is to find the best school district that you can find for the budget that you have, maybe push the envelope, a little bit; but find a home, even if needs repairs and upgrades! You can always save money and make changes over time, but at least you will ride the wave and increase your wealth through ownership.

Will your bank account pay you 8.1% interest, which is how much homes went up from March of 2017-March of 2018 (N.A.R.) where you are earning, on paper a leveraged amount based on the value of your home compared with your bank interest rate of 1/2 percent; or your 401K, IRA or pension plan where (you can borrow from your retirement account for a first time primary residence, medical bills and student loans or education without penalty)?

Another option would be your parents, relative or a very close friend that would gift you (no tax consequence if a gift from parents, discuss with our accountant for details) your down payment, which would enable you to purchase.
I am not suggesting that finding the home you really want will be easy; but what I am saying is go through a trade-off process and bare bones your decisions based on your financial future to increase your wealth, to stay ahead of whatever inflation comes down the road or guaranteed increased rents.

When you buy, you are putting yourself in an amazing position of attaining a fixed lease for 30 years, it’s called a mortgage!
Now, some of you sellers, what are you waiting for, a downturn, as it will eventually happen as interest rates rise, the demand decreases leading to lower prices?

Right now is a really opportune moment in time to cash in and consider selling, while prices are at this historic level. Waiting could be detrimental as interest rates go back to our normal 6.5-7 percent; which in turn will have an effect on demand, potentially causing prices to go down to attract fewer buyers.

As they say, “buy low and sell high” isn’t that the way to do it? Think of what you paid for your home, way back when and what the value is today and how much you can put in your pocket without having to pay any income taxes on your profit ($250,000 for singles and $500,000 for married couples).

Start thinking of where you might want to retire or move to and call me if you need any advice or assistance and my consultations are free* ask me for details.

Phil is the owner of Turn Key Real Estate @ 7 Bond St in Great Neck. He can be reached by email: Phil@TurnkeyRealEstate.Com or by cell (516) 647-4289 to answer any of your questions. 


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