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Even up here in our Truckee/Tahoe bubble, you have probably heard that the stock market has been particularly volatile lately, or ‘apocalyptic,’ as my father describes. The Federal Reserve has promised to keep interest rates at record lows for the next two years, while investors are moving their money out of stocks. For those of you not stuffing your cash in your mattress, want to know what a good investment is right now? Real estate. If you have been thinking about purchasing and wondering if now is the time, it is. Here’s why:
• In many local neighborhoods, purchase prices have rolled back about 10 years to roughly 2001 prices, but interest rates are about half of what they were then (currently in the low 4 percent range for a 30-year fixed), and will remain there until 2013, according to the Federal Reserve.
• Housing affordability is nearly record high.
• Locally, the demand for rentals, as well as monthly rents, have gone up year after year approximately 10 percent as more families move from homeowners to renters. For the first time in a long time, it may be more affordable to buy than rent.
• People like to vacation here. Supplement your mortgage by vacation renting when you are not using your house. Local rental companies can assist you for a percentage of the rental cost, or you can manage your own rental with the help of websites like vrbo.com or homeaway.com.
That is fine, you say, but aren’t banks extremely tight on lending money to buy a home? In a word, yes. The pendulum has swung far in the other direction from the lending-crazy environment that took place a few years back. For most conventional loans, a buyer will need at least a 20-percent down payment, a minimum credit score of 740, and at least two years of solid employment showing strong income and conservative debt, if any, to get the lowest rate available. If you don’t fit in this box, there are a few programs, both locally and nationally, worth looking into:
• The Town of Truckee’s residential down payment assistance program recently helped 13 residents purchase homes in Truckee. Look for another chance to apply for this program next year. Application packages can be found at townoftruckee.com.
• Don’t have 20 percent for a down payment to buy a house? Explore Federal Housing Administration loans (FHA), requiring as little as 3.5 percent down, with the option to roll closing costs into the loan. More info at hud.gov/buying/loans.cfm.
• Unable to get a mortgage loan? Explore owner financing. There are folks out there who still have deep pockets and are willing to lend their money. Although every scenario is different, typically private money is loaned at a few points above current market rates at time of agreement. Lease options — in which a buyer pays the seller option money for the right to later purchase the property at an agreed upon price, while paying rent plus a monthly portion toward purchase price — are also popping up again; options are typically one to three years. Contact a reputable real estate attorney to discuss both of these creative financing scenarios.
This financial downturn won’t last forever. When it does correct, we will all look back on this time in real estate and remember how cheap it was to buy a house.
~ Maura Mack is a realtor with Coldwell Banker in Tahoe Donner/Truckee and can be reached at (530) 582-2415 or maura@mauramack.com. Comment on this column below.
