Investors and the Housing Market
The 2016 National Association of Realtors Report entitled, Profile of Home Buyers and Sellers, noted that along with an overall increase in activity, the share of sales to first-time home buyers climbed to 35 percent http://bit.ly/2erduB7. This is great news following a three-year descent. I was pleasantly surprised that so many investors feel real estate is an important portfolio asset because there has been so much negative publicity about the volatility of the residential real estate market since the credit crisis.
Due to the increasing availability of credit and the stable low rate environment, investors have much more access to attractive financing which allows them to purchase a vacation home/investment property with a lower downpayment and lower carrying costs. Today, if you have a 20/25 percent downpayment, you can purchase an investment property and pay much less in carrying costs than if you rented the same property. I have always said that it’s a lot more fun to buy a home that you can have great times and memories in with your friends and family, than buying shares of stock.
People should understand that values can rise and fall and when you buy a home with a great location, you should be willing and able to hold the property for the long term. With rates so low, this is the best time to buy that dream home for personal enjoyment and/or investment. Obviously, the risk is that the home’s value can fall in the short run and day to day upkeep can become expensive.
We do not recommend that everyone should buy real estate for investment. For the conservative investor, it’s much safer to invest in a diversified stock portfolio including REITS. Unless you are affluent and do not need the money immediately, we would recommend against investing in real estate, and not engaging in “get rich quick” flipping.
A potential buyer should always get their mortgage pre-approved, documented by an authentic written commitment letter approved by an underwriter and not a salesperson. A dedicated mortgage specialist has many different options and programs to offer the client.