I loved my mother, but she was not the most optimistic person in my life. From the time she was 52 years old, she proclaimed every year that this would be her last Christmas. Well, by the time she was 83 she was finally right about her prediction. Being a little theatrical might have played into her performance as well.
For the most, I think I took after dad, who was not a wild-eyed optimist, but tended to see the proverbial glass as half-full. For the last four years, like most other real estate practitioners, I’ve been trying to see the silver lining in the economy and the real estate market. During that period, I was praised for my good attitude, accused of whistling in the dark, and classified as plain crazy. Most people are probably getting sick of real estate agents babbling “now is the time to buy, ask me why”. It was not bad advice, unless you were trying to time the market to buy at the absolute bottom of the cycle. Many people who do that never pull the trigger on anything. Virtually everyone who bought real estate over the last few years will make good money.
However, there is hard evidence that times are getting a little better. We currently have 403 active listings in Pickens County. I don’t know when we had fewer listings because the service I use for statistics only goes back to early 2004, and we’re below the lowest mark for that time period. Although there is a slight trickle of new construction, there has not been any significant building taking place since 2007. According to Bloomberg, there were up to one million new households formed in 2011, which was up from a record low 357,000 in the 2010 national census. Many of those were from children who had moved back with mom and dad moving back out. Those people have to live somewhere, and they may rent instead of buy, but they’re going to occupy space. True, some people have grown frustrated and simply withdrawn from the market, but there is a rule of dwindling supply and increasing demand that will start kicking in at some point.
The national average for home prices in 2011 declined 2.1%, but the south only declined 1.3%. Most gurus are predicting modest increases in 2012. The recent announcement about nationwide job growth has more effect on my thinking than anything else. In Georgia there were 600 new construction jobs in December, the first time construction has gained jobs in December since 2003. Manufacturing grew by 400 jobs, the first December growth since 2005. Job gains also came in information services, trade and transportation.
Then there are the traditional benefits of home ownership that are still important:
• Appreciation – Buying a home now (at the current rates) can almost ensure your home’s appreciation in the future. Mortgage rates are near historic lows and home prices in many parts of the country are down. This is the perfect recipe for home appreciation. Additionally, many foreclosed homes are available for a fraction of the original cost. This can translate to a higher profit if you decide to sell once the market rebounds.
• Property Tax Deductions – For income tax purposes, real estate property taxes for a vacation home and first home are fully deductible. The IRS (Publication 530) provides detailed tax information for first-time buyers that may answer many questions about what deductions homeowners are eligible for.
• Preferential Tax Treatment – If you own your home for more than a year and receive more profit than the allowable exclusion after the sale of your home, the profit will be considered a capital asset. Capital assets are given preferential tax treatment.
• Equity Building – Many factors such as credit qualification, loan flexibility, and annual percentage rate (APR) contribute to the final decision of what type of mortgage loan best fits your goals. Yet, a new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace.
Pickens may be a little slower to recover than some areas, but we’ll get there. If you snooze, you lose. That’s not whistling in the dark, my friends.
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