I learned a long time ago that studying trends and obtaining as much information as you can process helps you make more intelligent business decisions. However, everyone’s individual circumstances are different and what works for the majority may not fit others.
Here in South Florida and many other places in the USA such as California, the real estate market and real estate prices escalated during 2001 to early 2005 at very rapid rates some times 20 –30% per year. The reason for this was a perfect storm. The government revamped and computerized the Federal Housing Administration systems, making it very easy to process and obtain a loan. Mortgage rates dropped to historical lows. Banks were happy to relax loan requirements as the market values kept rising and it appeared that the rising prices insured the value of the properties no matter the strength of the borrower. The crash of the stock market and the terrorist events caused people to want to invest in something tangible and what could be more real than real estate. All of this positive movement and rapid increase in the market attracted speculation and further exacerbated the market getting ahead of itself. Once again real estate is an economic market at the laws and principals of economics apply.
After the hurricanes in 2005 and the extraordinary raise in insurance, people who purchased property on slim margins of what they could afford prior to the storms found themselves reevaluating their purchase decisions. This included the higher real estate taxes that came along with higher prices (In Florida real estate taxes are levied on the purchase price). The media kept reporting and announcing the real estate bubble bursting which became a self-fulfilling prophecy and due to these factors the pendulum swung wildly in the opposite direction. Suddenly there were a lot more sellers than buyers, which caused prices to begin to fall. Many of the people who were draining the new found but unrealistic equity in their homes through refinance after refinance were impacted by the falling prices. Is it any wonder that foreclosures have hit an all time high?
The correction is here and the question everyone is asking is where the bottom is and how when will we hit it? No one knows for sure however the rising costs of energy and related building materials continue to cause the price of new properties to rise. Yet builders that have new inventory are making significant concessions to move their inventory.
The Federal government is talking about tax cuts and the Federal Reserve has dropped the prime rate to 3.5%. Here in Florida the voters overwhelmingly vote to reduce taxes (see) http://www.floridarealtors.org/NewsAndEvents/n1-013108.cfm .
My advice is to find a bank or mortgage broker that you have confidence in. Determine what payments that you realistically can afford. Leave your self a cushion and safety reserves.
Work with a professional realtor. Research areas and communities thoroughly to insure that it meets your life style and has the amenities you desire but with in a comfortable budget. Due to the large amount of existing inventories you will find a lot of available inventory. You may even find a home that is not official listed on the market that you desire. The key is to perform your entire due diligence and make offers based upon realistic recent sales. Offer 15 –25 % less than those sales prices. If the seller does not accept do not get emotionally involved. Move on to the next property. You will be pleasantly surprised at how many motivated sellers are frightened by the market.
John Kavazanjian
"A Real Professional"
Florida Premier Real Estate, Inc.
2275 Federal Hwy.
# 330
Delray Beach, FL 33483
Business: 561 214-9426
Fax: 561 272-8791
Cell: 561 699 3004
jkavazanji@aol.com
www.palmbeachrealestatesource.com
