My entire life I have watched the Real Estate Business in wonder and awe. All of the different factors that go into the market are just mind boggling. Remember 14% interest rates when Jimmy Carter was president? How about 18% when President Reagan took over and had to tighten up the economy.
When all of the pendulums of the economy get in sync, the Real Estate Market acts like the stock market. Irrational Exuberance, really is the only way to describe what happened between 2005 and 2007. When the government backed owners of fannie mae and freddie mac wanted into those high paying loans, and the geniuses on Wall Street “repackaged” toxic loans into “safe” bonds, real estate went crazy. Personally I chickened out in 2005 and sold all of my real estate positions except a small piece of land in rural Texas.
While loans are still a bit difficult to get, investors have realized that the population growth has outpaced the supply of homes. In 2005 you could make $8 an hour and get a “liar” loan for $400,000 at 8%. Your house payment could end up being 100% or more of your monthly paycheck. While those loans are gone, people still need a place to live.
In Orange County the Board of realtors published the average square foot price has risen nearly 12%. Stocks have also done quite well. Simply put inflation is in full swing, and money sitting in a bank earning a nearly non-existant 1% is just dead money to most investors.
Cash is coming out of the bank and moving into the stock and real estate markets. If you are thinking of buying, selling, moving up or out, talk to a Realtor. In simple terms if you are planning to move in the next five years, now might be the right time to lock in a good interest rate, and set your tax basis at a reasonable value.
Scott Bourquin is a Realtor at Keller Williams
His website is www.socalbeachrealtor.com
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