Home : Blogs : Gabe Sanders, Stuart Florida Real Estate : Stuart Florida Real Estate

Even the Experts are Buying Homes

Home prices have hit bottom in most areas of the country, but they're not like a rubber ball. Sellers can't expect much of a bounce. Homes for Sale

At the Center for Economic Policy Research, in Washington D.C., analysts are predicting that the pricing arrow is pointing up, but not very far. There are still too many foreclosed homes on the market.

So, what did the center's co-director do? He bought a house. He doesn't expect its value to rise much in the foreseeable future. But the home had features he loved. The price was affordable, and the loan's interest rate was below 5 percent.

This set of circumstances encouraged him to take the plunge and acquire a place his family could call home for many years to come.

Today's reasonable prices can make a good case for buying rather than renting, say advisors quoted in USA Today. While many first-timers are leery of making a long-term contract, here is a way you could determine if the move is a wise one.

Homes Sold * Divide the price of a home you are considering by the annual rent for a comparable place. If the number falls below 15, buying starts to look like a good idea.

* Consider whether you will stay in the home long enough to make the purchase worthwhile. Closing costs are high. If you intend to sell the house and buy another in two or three years, you could take a loss.

* Analysts say it's reasonable to buy a home only if you plan to stay in it for five to seven years.

MLS Map Search for Martin County Florida

Posted by Gabe Sanders, Stuart Florida Real Estate on 01/15/2010 06:45 AM

Comments (101)

Home Buying in the Home Buying Channel

Generate short URL

This post has been included in Florida Real Estate News Martin County, FL Real Estate News
Post is included in group: 1st Time Buyers
Post is included in group: Advice for Buyers
Post is included in group: Realtors®
Post is included in group: The Lounge at Active Rain

101 Comments on Even the Experts are Buying Homes

JAN

2010

Good sound advice. The emphasis, IMO, should be on the matter of HOME.

Often the benefits of HOME ownership are quite subtle and can't be quantified.

I must get around to writing that post I've been planning about the word "afford".

All good points. Thanks for the post. When investor's and those that see a broader picture are buying; others should follow their lead. Saw a study that said home pricing wouldn't hit bottom, nationwide, until November 2010. After the last few years I hope it's right, I'd prefer you were, but I'll take it's prediction.

Gabe, this is refreshing. Tell me about the math . . when the number falls below 15. I find this interesting. And I think I can help alot of people.

I am seeing more cash offers right now, the people with money are snapping up deals like crazy.

With all the talk about prices (up, down, flat) I'm afraid some of our first time buyers are forgetting the "home" part and shopping for a "deal".. Lenn is correct, as Realtors we have to keep reminding them about "Home".. I like the thought of a 5 year stay in your new home..

Good morning Gabe!

I think that the pride of ownership has a lot of intrinsic value that cannot be quantified in terms of dollars. Also, by entering into a long-term lease, you could jeopardize the chances of getting a great deal

Congrats on the feature! Well done.

Thanks Richard, I couldn't agree more. It shouldn't be the deal that's foremost, but home ownership, location, life style, etc.

Gary, I try to remember that general predictions nationwide will not apply to all markets, or even all segments of the market. I think some segments, especially around here have bottomed and will not go down further, others .... ?

Agreed, Lenn and John.

Gabe, I have contracts pending with three buyers, one is a capital manager, a Real Estate Attorney, and a banker...these tells me the folks that look ahead of the curve are purchasing now.

We just put an offer in on a place for ourselves. There are some amazing deals out there.

As long as one has a stable job, not moving for 3-5 years, this is a good time! Bingo!

Gabe - Pricing, interest rates, and selection are prime in our area. Nice post.

Interesting way of looking at the rent vs. buy scenario. Probably part of this equation, at least for the next few months, is the tax credit.

Buyers are out that's for sure. But they have to be realistic. It's a buyer's market not a FIRE SALE. Some people are too focussed on the "deal of the century." Once they see the "deal" - they realize that its too much work to bring it up to snuff.

Here in Michigan we are fcing more of the same for 2010 - continued price erosion, continued high foreclosure rate, continued loss of population, continued short sale price pressure. It's not a pretty picture, but it's home, so we'll figure out a way to survive for another year.

Gabe,

Great Post. Thanks for sharing,

Matt Naumann

Affordability and a place to call HOME!! TWO solid reasons to get into a new place!! Thanks for sharing!

Gabe, great post. Our Lexington values seem to be leveling out and sellers are still paying closing costs. A local lender has a 100% conventional loan with no PMI! The buyer only needs $500 total cash! So why wouldn't someone buy rather than rent!

Great post Gabe. I like the simplicity of your message - it's definitely time to buy.

Hi Gabe! You are spot-on with this post! Our Ninja coach just told us that if we weren't buying now, we weren't in the business!!

Congrats on that little gold star! Well-deserved!

Great post. I agree that it is a great time to buy. Prices in Denver seem to starting back up again.

This is such a great post! And I agree, that many have forgotten that a house is not just an investment, it is a home!

As usual, Lenn had some great points, too. But also, your rent vs. own calculation is a brilliant way to quantify the idea of home ownership to clients who want to see some numbers!

Gabe, not expecting big jumps in appreciation is a more sane world view. In North Texas we have NEVER been on that planet BTW.

Informative post, and important for potential buyers to ponder when considering buying.

Thanks for the post.

Thanks for the good read today. I enjoyed it.

patricia/Seacoast NH

Gabe, great post and congratulations on the feature.

Great points, Gabe. It is important to always make sure buyers have a short and long term plan. If they buy knowing they will move again in a few years, it may not be a good idea or they need to understand they may take that loss. I know that doesn't come up all that much, but preparation is critical especially in this market.

That sounds like great advice to me. In our neck of the woods, there is not a lot of active inventory. So everyone is scampering to get a good deal!

Buyers are seeing shrinking inventory here in the low to moderate price ranges (under $175K) in the Boise area. As inventory is depleted, I expect to see some modest increases finally in price as we move into spring.

Gabe - This can escalate into a mantra. (oh sorry it already is) Buy low when the affordability index makes too much sense. Crybabies will cry in the future on why they didn't buy when the market was low. very good post

Wow Gabe! I love this post! Great for so many fence sitters that are afraid to jump in!

Look at investors also, they are starting to buy because they know we are close to bottom also. They know that when prices start to rise they can either sell for a profit or rent for a profit because people won't be able to afford to buy again, either way they are making money!

Hi Gabe -- I haven't heard of that calculation and 15, interesting.

It's a great time to pick up investment property too. What the old saying, the profit is made on the buy, not the sell.

Gabe, It looks as if the housing market is starting to pick up in this area. Great advice. Congrats on the feature...

Gabe, I had never heard the divide by 15 rule before. That sure simplifies things. Prices are very appealing right now. Too bad I'm a broke Broker :)r

Sound advice. One more thing if prices don't appreciate much then the cost of holding the property will not of offset but higher price should one want to sell. It should be a home you can afford.

I think people should be looking at a ten year horizon, but that is merely a local thing... And I also agree with Richard that there is more to ownership than a financial decisions...

If you're buying a place as a HOME with intention to live there and aren't expecting ROI then it's a great time to make a purchase. People who buy now are going to be sitting pretty when the market starts to act normal again, but I think we have quite a bit of time until then. 5 to 7 years is solid advice.

Hi Gabe, Thanks for the equation, that's a new one for me. I think it's a great time to buy a "Home" if you're planning on staying there or keeping it as you said for 5-7 years - buying provides a lot of stability, too especially for families.

Gabe sound advice. It is certainly a good time to purchase but of course one have to carefully consider the reason for doing so.

Congrats on the gold star.

ToulaRosebrock,com

Hi Gabe:

Great post & points made here!

BTW, Congrats on the feature...

It's a fantastic time to buy.

Interesting formula, providing the buyer takes into consideration all of the costs of ownership.

JAN

2010

Nice post, Gabe. I re-blogged. I read the newsletter you referenced above, and find it really does have nuggets of good info.

HI Gabe - You make some great points in an easy to digest format. Well deserved feature.

Besides closing costs, buyers have to have $$ for repairs and deferred maintenance when buying most distressed properties. Again, well worth it to have a home of their own.

You can't be that niave.. Banks are dumping homes without concern.. As long as they drop prices to move inventory the blood bath is NOT over... Another 20-30% drop is coming and it will wipe people out.

Until we go back to inventory (regrdaless of seller) being priced the same its not over!

Why would I buy John's listing for $400 when I can by BofA REO for $250 (same unit)? Why would bank lend on John's listing when the BofA sale just provide the market value is $250.

Hang on to your hats kids...

>>>Center for Economic Policy Research<<< Boy I beleive them, don't you? No one in this government EVER told a lie...

B.S. Wishful thinking.

Maybe you haven't heard about the 1.8 million interest only loans that will start to float to the surface in the next few months.

The REAL experts are predicting houses will fall another 50% by the 4th quarter of 2010.

And the guy you reference above works for the government....the ONLY growth sector in the entire employment picture.

Republicans suck

Democrats suck more

Obama sucks the most.

Where did we get these criminals from? More importantly, how do we fumigate the government and get rid of all of them?

First off I hope post #47 is wrong ! I like the 15 number and will use it in seminars. The old truth stills stands that almost all of America is making a mortgage payment, unfortuately many are making it on someone elses property (RENT) !!!!

Val

I would buy 10 houses right now if I could...we are going to get at least one as an investment.

Keep the fluff coming. This is probably a secret post from the NAR.

INTEREST RATES WILL RISE VERY SOON!!
ARM'S RESET IN THE BOAT LOADS IN 201!0!!
SHADOW INVENTORY HAS EVEN STARTED TO LEAK!!
UNEMPLOYMENT NUMBERS ARE MANIPULATED TO PLEASE!
THIS COUNTRY RUNS PURELY OFF OF CONSUMER SPENDING!

Tell me how in the world we are even near a bottom. I just heard of a home in Southern California being sold higher than when it was purchased in 2006! Doesn't sound like much of a drop to me. You can lie to the herds and they will believe as I can see by the number of people replying here. But those who understand simple laws of SUPPLY AND DEMAND know the truth. 2010-2012 will be ugly for the RE and Financial Markets in the US. You have two choices. Prepare for the worst or ignore the possibilities.

WAKE UP LITTLE SUSIE!

A little article for your reading pleasure:

http://www.nakedcapitalism.com/2010/01/scary-shadow-inventory-numbers.html

Wish you would give some more details to the 15 number. I have a rental that I am thinking of putting on the market this year. The calculation comes out to 13.88. Does this equation factor in tax write offs?

In this new landscape of real estate and the ever-changing value of homes, it is important to be a solid and reliable resource of information to assist buyers in their home buy or rent decision making process.

The bottom line as your post so clearly highlighted is all about affordability and an expectation of making their choice a home for five to seven years.

It is a great time to invest, and investors as well as first timers need to get out there.

To #49, Michael I agree. I always tell people, 'You are buying a home, you just need to figure out for whom.'

Great post.

I am an agent that practices what I preach! I just closed on a new home 3 weeks ago. Prices are great and interest rates are phenomenal. I got a 30 yr fixed conventional loan at 4.87% with no points. It is also a good way to be able to empathize with my clients. This is my 11th home that I have purchased in the past 30 years and it is still nerve wracking, exhausting and thrilling all at the same time

I just sent out an investent opportunity to my database, expecting maybe 1 or 2 inquiries. I have gotten over a half dozen people contacting me about this, either saying that they are interested, or they know other people who are. Just another example of how many people (many investors who have been holding out) believe that now is a good time to buy that investment.

Unfortunately, the FRC has already purchased 1.25 trillion in MBS and other securitized mortagge securities. A full three months prior to the program winding down. The recent numbers are very similar to how our government puts forth GDP and Unemployment

The bottom line is; If you must once again prove income to obtain mortgage financing-the any median price increase will be tied to wage growth. When you apply the family median income for NYS to the median house value the ratio still exceeds 3.2 %. Historically, this number would closely track wage growth and a balanced ratio would never exceed 2.6%. We are ultimately looking at another 30% correction to NY property values. On the customary overshoot to the downside which is typical of any asset bubble that is deflating, we should expect to see property values begin a bottom trough at 2001-2002 levels. This of course calculates 8% unemployment and 14% U6 unemployment numbers.

The market always feeds from the bottom up and until we see affordability in the starter areas we will not see true growth in mid-range and luxury. If you are truly buying a home it should be for long-term purposes and potential buyers should be made aware that property values will continue to drop for another 18 months and are expected to resume traditional price growth models going forward.

I live the simple math so want to come back & play out a few scenarios. I'm also wondering how mortgage rate factors into this?

Many buyers who bought today will be thankful in the future. They are a leg up on the rest and they will be looked upon and savy. Kinda like the guy who bought Google stock at $3.00 back in the day.

It's a great time to buy when you have the money and are emotionally ready for it. I only wished I was in the market reight now.

Who are these experts? How did they get to be experts? Is anyone who bought a home an expert or do we decide later when we find out if the house purchase worked out OK?

I know many experts who are not buying houses. And I know many amateurs who are buying houses. Are the amateurs going to be the next batch of experts while the current batch of experts goes back to being amateurs?

Zowie! "Time will tell" is the response we often get from those who have no idea what will happen.

I particularly enjoyed Jerri McCombs' (#54 above) comment "I always tell people, 'You are buying a home, you just need to figure out for whom.'" (Disclaimer: Jerri is no relation to me that I know of)

Akron, Ohio

The gulf is wide between the doomsayer comments of Mike and Wake Up Little Susie and the irrational exuberance of the rest. The right actions to take lie somewhere between head for the doom bunkers and bet the ranch (again) on real estate. What is disconcerting is the air of certainty on both sides; there are so many variables in the market (unemployment, foreclosures, consumer sentiment, politics, and dare we say the ever present attack on the homeland) that all bets should be off, at least until a scenario takes better shape. Anyone who goes out and buys property in this environment thinking it is a sure thing has a fool for a financial advisor. Let's hope those who do can hold onto the property, and their jobs, for 10 years at least.

For those who should be buying, now is a good time - some people are the rental types for various reasons.

Talk about greed, I PRACTICE WHAT I PREACH #55. You are just too greedy because you want your commission and could care less about what happens to the housing market. If you were educated enough you would inform your clients about the potential road blocks ahead. I am not saying you need to deter clients from buying, but prices can and will continue to fall with the glut of inventory. Don't be greedy because when the market turns you will have pushed away any potential referral business with your over confident mindset that the market is in recovery mode.

The agents who will get business in the future through referrals are the honest ones like myself who speak the facts. I think rates are great and if the buyer is in a financial position to purchase a home and has an excess of funds in the bank, it may not be a bad decision. Unfortunately most are not in that position.

http://finance.yahoo.com/news/Lets-Hope-These-4-Things-Dont-usnews-2604707770.html?x=0&.v=1

Interesting post, Gabe. It's clear to me that you are not urging everyone to get out there and buy but some folks are riled up at your suggestion that it MIGHT be wise to do so. For me it all comes down to personal circumstances....and the biggest factor of all in terms of upside potential are the conditions in micro-markets. I think it would have been good to mention this in your post.

Hi Gabe. That's an interesting rule of thumb which seems to say if the price of the home is less than 15 years of rent, then it's a good buy. One could also use that rule for a rough approximation of what rent to charge for a home.

You can actually buy some homes in our area for less than rent, and this would be including taxes and insurance costs. Buying however is not for everyone. Those who are still sitting on the fence may see that they waited too long. Many of our MLS properties are now seeing multiple offers.

I sell homes in a second home market and I predict 2010 to go lower at this point then last year. Your post was interesting

Sounds like great logic to me... let's see if those numbers increase a bit this year. Still...the home of home ownership is definitely something that is in the determination.

When I first started in real estate the average number of years home owners stayed in their homes was 7. I couldn't believe what a transient society we became, with buyers wanting to move up in only 1-2 years. Even in better times they couldn't guarantee a profit in such a short span.

We've been in our home for 7 years - time to move! (We really are).

I love the simplicity of the calculation but I have to inquire about the number 15. Why is that the number we want to be below? What does it relate to?

Good post and even though it is basic info--- very valuable. Thanks for sharing! I will re-blog for sure- Kathy

This is a very good sign! It appears that the Buyer's are taking a good look as to if NOW is the time to make their home purchase.

Oh my, I've owned at least one rental property and sometimes two at a time since long before I got into the business. Then I bought into the hype about owning investment properties. And then the market went south. Youall go ahead and do your investing. Yes, it makes for a good tax shelter -- if you need one.

But my caution is that you risk your future reputation as a real estate guru, counselor, expert or whatever you want to call yourself, if you encourage any buyer without deep pockets to buy investment property in the current market. Please re-read #51. He's not so far off the mark and in fact I would add that foreclosure/short sale inventory will increase over the next 12 months, interest paid on investments is static or dropping, and we will continue to be economically challenged by the international economy for some time to come. In fact I think 2012 for any kind of meaningful recovery is exceedingly optimistic.

This is not to say that as Realtors, we should stop selling, stick our heads in the sand, tell our customers to keep their money in their pockets, etc. People still need homes for many different reasons, and some choose to be investors in this market. That's a decision only buyers should make for themselves. Be their calm advisor and not a cheerleader for the economic recovery program.

It will be a very long time, if ever, before I become convinced that "if I believe in the product I sell, I should own some."

Great post! Interesting comments.

For all of you asking about where the divide by 15 formula came from, please take a look at this article from CNN/Money.com as well as numerous other web references: http://money.cnn.com/2009/05/22/real_estate/renting_buying.moneymag/index.htm?postversion=2009052604

Just a quick note for some that have posted some fairly negative revies of this blog. I never said that prices may not go down more, but current incentives and a very favorable interest rate makes this a very attractive time to buy for those looking for a home which they plan to stay in for some time.

For comment #75, I'm not sure why the personal attack, nor do I ever mention investors in this post.

To Tom, (#61) the expert I mentioned was the co-director of the Economic Policy Research.

There are others I'd love to answer here, but unfortunately time is limited. I value every ones opinion but do not necessarily agree with them, nor will I make snide remarks or accuse those who I don't know of any ulterior motives.

Hi Gabe, Great info ! I like the " 15 " calculation.

Gabe,

Thank you for that valuable post. I'm seeing the buyers who watched and waited (and didn't jump in) back in 2005 and 2006, suddenly out looking and asking lots of intelligent questions. Our market is fantastic both for first time buyers AND anyone looking to find their "place in the sun" for retirement.

There are many agents who are purchasing both for themselves and their children. It's very exciting to be part of this housing correction.

All the very best to you in 2010!

Connie

Good to read that people are looking at homes in the conventional, wise sense again, as a home, not an investment. Rental homes are investments. And they should be analyzed and purchased with whole different set of standards than a primary residence. Great post and best of luck to you Gabe.

There are some REOs that still have not been released by the banks yet -- they will be released shortly into the market listings for the tax breaks --- will that again raise the inventory?

Good Post -- thanks

This is to funny.. many of you are posting without thinking.. or even reading.. "Good Post is really GOOD TOPIC

#47 - Nailed it..

At the end of the day.. If you are a buyer for your forever home, you don't care about the pending drop, but those hoping to make quick buck WATCH OUT! It's not going to happen...

Supply and Demand govern the market, as does lending.. Two out of three are out of whack..

Good agents will make fortune, because these houses will be sold but a what priceon the consumers will be intense! When the consumers get it in the shorts, what do they do.. They legislate and letigate.. both of which will kill brokers, and E&O carriers..

I got a call from a client today who said that there are a lot of closed sales in his area and things are looking positive as a seller.

Amen to 47's comments!!!

Interesting news. Last time I heard, the economists had revised their prediction until 3rd Quarter 2012 before the housing prices start to rebound across the nation. Maybe this guy just wanted to take advantage of the tax incentives before they go away (hopefully for good) at the end of June.

I think will be about 2 years before we see meaningful increases. Why ? Because we will have inflation and everything will go up in price. Why do you think lenders are controlling the flow of inventory to the market ? However the buyers that lock in a 5 % rate will the the smart buyers in the long run.

Using that calulation my daughter purchased a condo at $550.00 per month plus association fees, very good advice!

JAN

2010

Gabe

The rule of 15 is a good yard stick and educating the buyer on facts and not opinions can eliminate a lot of frustration!

I think this is a great time to buy. The people with money are.

We're seeing more cash buyers taking advantage of the amazing deals to be had, but the good ones don't stay on the market long.

I'm seeing the same in my market. Cash is starting to make a come back in the lower price points, and when asked, I've had several buyers tell me that they are buying real estate because their financial advisers are not just recommendingit, but doing it themselves. Great time to market to investors.

JAN

2010

I also had not heard the rule of 15 before. I used to recommend that buyers plan to stay in their homes 3-5 years, but after reading this blog post, I will now use 5-7 years.

Gabe,

Affordability, location, and utility. Homeownership rights and tax benefits as well. What's the factor of 15 and its origin?

Eugene, see # 77 above. Thanks.

JAN

2010

This is a great time to buy. For 10 years people where priced out of buying, now most people can afford it, well if they still have a job in these tuff times. Homes should not be looked at like the stock market, I will sell 2 years from now and make 40 percent profit. A reasonable appreciation in a home is about 1 to 2 maybe 3 percent per year, it is a hedge against inflation.

JAN

2010

Hello Gabe,

Terrific post! Thank you for the information & good advice. Now is a great time to buy! Congratulations on the feature!

Chris

I think the experts have it right. There are a lot of good reasons to buy.

JAN

2010

This is good advice Gabe. And I buy the products I sell!

JAN

2010

I think 4 years is enough in Seattle to warrant buying a house.

Thanks everyone. Now let's see who is buying!

FEB

2010

This was the main goal of owning a home in the first place: a good LONG term investment, a place to call home, a place to make your own for years to come.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?

Gabe Sanders, Stuart Florida Real Estate

Stuart, FL

More about me…

Martin County Residential Homes, Condos and Land Sales

Address: 2 N. Sewalls Point Road, Stuart, FL, 34996

Office Phone: (772) 323-6996

Cell Phone: (772) 323-6996

Email Me

Professional real estate services for Martin and Saint Lucie County, Florida. Expert service for the towns of Sewalls Point, Jensen Beach, Palm City, Hutchinson Island, Hobe Sound and Port St. Lucie, Floria. For more information visit our web site at GabeSanders.com or view out listings at Treasure Coast FL Homes.

Map Search

Listings

Links

Archives

Find FL real estate agents and Stuart real estate on ActiveRain.

Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.