Why Now is Actually a Great Time For a Georgia Mortgage
Some see the slowdown in the Atlanta housing market as an excellent opportunity to build a portfolio of solid investment properties.
Last week, the Atlanta Journal-Constitution looked at some reasons put forth by investors who are leaving the real estate market, believing they are getting out at the right time. This week, the AJC reviews arguments presented by market bulls, who see now as the time to buy more houses:
1. One of the most often quoted reasons for buying now is that weak-hearted speculators have lost hope and are willing to sell for less than they paid initially, just to avoid an additional loss. This is a typical reaction to a slowdown in price appreciation. Observers in South Florida and California may very well see this kind of opportunity.
2. Despite a lot of talk, Georgia home loan rates, especially long-term fixed rates, have been persistently low. This allows a bargain hunter the luxury of locking in for the long haul. Although the Federal Reserve has raised short-term rates 17 times in the past several years, we have not seen the expected jump in long-term fixed rates.
3. Because of the substantial price run-up of the past decade, many owners already have large profits built into their prices, allowing room to negotiate. Only those who bought recently or are highly leveraged are in the awkward position of having to get almost full price.
4. If mortgage rates rise, it will become less affordable for a buyer to get a home, making him or her more likely to rent. As demand increases, rents will rise. Vacancies are already falling nationally.
5. In the past decade, lenders were willing to accept lower down payments and more non-traditional credit scores than ever before. Unfortunately, many of these bad credit mortgages are resulting in a flood of defaults.
Increased foreclosures make lenders tighten up their loan standards regarding investors, which tends to make it harder for new investors to enter the market, limiting competition.
6. As adjustable rate instruments tied to LIBOR and other non-traditional loans reset over the next few years, their rates will jump, causing many to experience higher monthly payments. This will cause the number of sellers and foreclosures to increase, boosting opportunities for investors throughout the repossession process.
In past slowdowns, lenders certainly offered adjustable-rate mortgages, but they were most often tied to U.S. Treasury indices. In addition, changes of past loans were typically limited to 1-2 percent per adjustment. But today, some LIBOR loans have no limitations on adjustments.
7. Nationally, we are seeing a trend toward additional government-mandated expenses in new construction. As the cost of building homes rises, the cost of older homes rises along with them. When you add all these reasons to the traditional arguments for real estate investing of excellent tax advantages and remarkably low-cost (some would say subsidized) long-term financing, it’s easy to see why some investors are still bullish.
8. The retirement plans of the huge generation of baby boomers are less defined that those of their elders. Many married later in life and expect to keep working longer and take alternative paths toward their retirement years. The conclusion is that the downsizing Americans go through on their way to retirement may come later.
The study also showed that nearly one in four boomers have a high net worth (more than $500,000) and that this percentage is expected to increase as the generation gets older. A vast majority of boomers are homeowners, and nearly half own additional real estate.
When you add increased longevity and postponed retirement to this financial capacity, the result may be low turnover of real estate — and a stabilizing effect on prices over the next few years.