It’s easy to feel negative about Rhode Island's real estate market when all you hear is bad news. "Houses are not selling," "There are no buyers," "Banks won't lend," and "The economy is too weak for the housing market to improve." Rhode Islanders need to look past the headlines and see the big picture. The greatest buying opportunity in our lifetimes, especially for first time home buyers and investors, is right now. Here are a few reasons it’s an absolutely awesome time to buy:
Low Rates - Mortgage rates are at historic lows. Two decades ago a 10% mortgage was a great deal. In 2012, rates range from 3.75% - 4.5%. Every .5% drop n a 30 year, $300,000 mortgage, puts $90 a month, $1,080 a year, or $32,400 over the life of the loan RIGHT IN YOUR POCKET! Low rates make home ownership much more affordable!
High Inventory - The absorption rate, (the length of time it will take to sell the existing inventory at the current pace), on Aquidneck Island is now 13 months. In a normal, balanced market the absorption rate is 6 months. The sheer volume of inventory is making sellers more flexible than ever. Make an offer. You might be surprised how hard a seller will work to make the sale.
Low Prices - Headline after headline tells us home prices are depressed. Sellers are reducing asking prices to attract buyers. It's not just the rates that are working in your favor. Low prices are rapidly increasing affordability.
Flexible Financing - It's true that it's harder now to qualify for a mortgage, but there are still savvy lenders out there helping credit worthy buyers get the financing they need. Take a look at this blog post on how to buy a home with 10% Down and No Private Mortgage Insurance (PMI). Associate yourself with a knowledgeable agent and they will lead you to experienced lenders who will work with you.
More and Better Short Sales - Now that banks are slowly starting to make a little money, they are more willing to write off losses. This development will grease the wheels for more short sales with less aggravation.
Tax Breaks - Interest on mortgage payments is deductible, and during the early years of your loan, most of your payment is interest. Not only do you increase your equity with each payment, but you decrease your tax burden! And that's not all. In addition to tax deductions while you own the home, there are benefits when you sell! The first $250,000 in profit for single individuals and the first $500,000 in profit for married couples is tax free provided you have lived in the home for over than 2 years.
Future Rental Options - Buying now at the right price and rate increases the likelihood you can make money renting your property in the future. As rents rise, fixed rate mortgage payments stay the same, and cash flow increases as the spread between rents and carrying costs widens!
Every market offers opportunities. Right now low prices, low mortgage rates, tax sheltered gains and the mortgage deducion favor buyers. If you have the financial wherewithal to obtain a mortgage, well… really… WHAT are your waiting for? Move ahead; don't look back; take advantage of this opportunity before the inevitable upswing. You'll be glad you did!
Jeff Brooks, Realtor, Hogan Associates, 129 Bellevue Ave, Newport, RI 02840 401-484-7368, Jeff Brooks the REALTOR