by: Allison K. Smith, Realtor
http://www.ColoradoDreamHome.com

What is .0076%?

It is 76 ten-thousandths of 1 percent, clearly a very small number. It also represents the percentage of sub prime loans compared to all outstanding loans in the United States. Isn't it time for some perspective?

There are currently $9.9 trillion dollars in mortgage loans in the United States. Of that $9.9 trillion, there is only $75 billion in sub-prime loans or .0076%. Does this .0076% really merit all of the negative attention and sensationalizing that the media is giving it - absolutely not!

Why is the media giving the sub-prime "melt down" so much publicity? The true reason the media is harping on the sub prime sector is that many Fortune 100 and 500 Companies have purchased financial products as assets that have sub-prime loans within the product. In years past, there has been a large rate of return on these products. However, these companies now have to write off some of the losses they have incurred and that is why the media is having a field day. What about the hundreds of billions of dollars in profit they have made on sub prime loans over the last 6 years?

It is a great time to buy and I think the following numbers will help put into perspective the skewed representation from the media that the housing industry is receiving:

99.9924% is the percentage of home loans that are NOT sub-prime loans

97.4% of all mortgages are current and being paid on time

6.9% is the average yearly rate of appreciation of homes since 1952

30% of all homes in the United States are paid off

Interest rates are great and this is the perfect time for first time buyers to jump in the market and for investors to increase their portfolios. In addition, according to an April 14 article on Realtytimes.com, "The first quarter of 2008 makes the 24th consecutive quarter that rental prices have escalated nationwide." Further, the vacancy rates in the Denver metro area are well under 6% this year and are projected to go below 4% in 2009. This translates into continued increases in rental prices.

It has never been more true then, that "If you can afford to rent, you can afford to buy." The interest rate trend from the last 15 months shows mortgage rates climbing from 6.2% in January 2007, to 6.6% in July 2007, and now plunging to the current rate of approximately 5.9%. Forecasters predict rates to continue their downward trend through July 2008, http://www.forecasts.org/fha.htm, thus indicating that right now is the best time for new buyers to get out of rental properties and enter the housing market!

Should you buy a new home or investment property now?

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Yes, buy while choices & prices are great!

No, I like paying my landlord's mortgage!

 

 

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Here's what I think: First, residential real estate is not a national market product - it is a local one. To say from a national position that this is either a good time or a bad time to buy real estate is like saying the national forecast for the U.S. today is 92 degrees - it is a useless and irrelevant perspective. What is happening in your local market is all that matters. Second, trying to predict when it is a good time to buy, or not, means you're trying to time the market. Staying on the sidelines is the surest way for most people to never time anything correctly. Last, and maybe most important - there are always two markets in every market. There is the market of properties that are good buys and there is the market of properties that are not good buys. Interestingly enough, this is true in either buyer or seller markets. To categorically say that this is the time to buy or not is absolutely ignoring the fact that every market really has two markets inside it. I agree with NAR's chief economist, as well as a couple of noted local economists, who have all indicated that the Colorado economy has already turned the corner, as indicated by our job growth and population increase rates, as well as the fact that we are no longer in the top 5 for foreclosures.

The state of Denver's real estate market

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Yes!

No way.

 

 

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