I read this article earlier today stating that in 98 of 100 of the top housing markets, buying is cheaper than renting. I remember when buying was incredibly expensive in many cities compared to the median income of the area. That signaled the top of the market. It wasn’t long before the bottom fell out and there was no demand. Now I have to wonder if the bottom of the real estate market is near. Of course it could be another year or two before there is an increase in housing prices, but if it doesn’t make financial sense to rent, then that says something.
If nothing else, it means that investing in real estate makes sense for investors who have the money and can turn around and charge rent to those who are unable to get mortgages. Mortgage rates are near record lows which is another good reason to purchase a home.
I remember growing up listening to my dad mention the mortgage rate of 12% that he was paying on the house where we lived. From there I remember interest rates increasing into the late 70’s when you could get up to 8% on a passbook savings account. As a result, I considered myself quite fortunate to get a mortgage for less than double digits when it came time to purchase my first house.
I also remember those days as being before the internet. In order to see the impact of interest rate changes, you had to have a book and look at tables unless you were a financial professional with the nifty financial calculator. But now, there are awesome mortgage calculators online that can be used to run all sorts of down payment and interest rate scenarios instantly.
With interest rates so low, this could be considered a once in a lifetime opportunity to purchase some real estate. I wouldn’t worry about trying to time the market since the fact that renting is more expensive would suggest to me that renters will start looking at ways to get away from that option. There is still a substantial portion of the population that desires to own a home.
In fact, I have a long term renter (about 3 years) that informed me earlier this month he had purchased a home and would be moving out. Of course, I am not excited about losing a tenant and having to rent the place again. But I am happy for him that he can finally afford to get his own place. Besides, we always have someone looking to rent from us and have a few prospects already. I bet that it can be rented without having to run an advertisement in the local paper.
One of the great things about the internet and Facebook is that my wife is able to keep tabs on lots of friends or acquaintances that might be looking for a place to stay. We are often contacted about openings that we might have. Unfortunately, we are not in a position to purchase ourselves and take advantage of the low interest rates.
Instead, we are working at paying off debt and are hoping that while the housing market is bottoming out, it takes several years to really pick up steam so we can buy low and eventually sell high.
- Existing home sales signal rebound that is real (zerohedge.com)
- Mortgage Rates are Near a 60-Year Low (brendanfrey.wordpress.com)
Despite the tough economic climate wreaking havoc on personal finances in the UK over the last few years, there are still a number of ways that people can make – or at least invest – money wisely through home improvements. While it’s always important to ensure that there is a sufficient policy of buildings and contents insurance to protect yourself during this process, the fact is that people stand to make thousands through ever-desirable additions to a property.
Phil Spencer, the mastermind behind Channel 4 show Location, Location, Location alongside Kirstie Allsopp, is a man who knows exactly what’s necessary if money is to be made, or spent wisely and reflected in an eventual resale of a property.
Conservatories are perfect for any home
While Phil was clear to highlight how many people know that “the danger is that your conservatory ends up looking like something just bolted on the back”, such a living space that matches the style of the rest of the house is a great way to improve the value of a home. A conservatory costing between £5,000 and £30,000 can add up to seven per cent to the value of a house, so spend wisely if you know how much your house is worth.
Kick your car out of the garage and move in
Turning the garage into a living space is a great idea. “The fact is, 90 per cent of British garages don’t contain a car,” Phil continued.
“They are a wasted asset.” Just £10,000 could see you adding real value to a home – multiply the square footage by local cost per square foot to find out how much it ups your house price.
Prioritise the kitchen
High street companies know exactly how much a kitchen can add to the value of a home, so long as it has a triangle between the sink, fridge and oven. However, ensure the cost of your kitchen matches the house itself – don’t over or underspend on the asset. Phil added: “[A] new kitchen will add 4.6 per cent onto the value.”
Do your research and remember that not all investments have to be huge
– just be sure to take pride in your property when it goes up for sale, and remember to ask yourself if you’d be impressed by what you see if you were the buyer, not the seller.