A Great Time to Invest in Real Estate; Warren Buffett

By
Commercial Real Estate Agent with KW Commercial

Warren Buffett recently stated that home ownership makes sense for most Americans.  I have to agree,  it is a good time to invest in real estate.   After all, we have devalued real estate, we have bargain interest rates and given the number of closed transactions, most people are on the side lines. 

Lower prices + bargain interest rates = a great time to invest in real estate. WB

When we look at LP (lower prices) matched up with BIR (bargain interest rates), it equates to the most affordable time to buy real estate since 1970.  1970!  Some of us remember that the Kansas City Chiefs beat the Minnesota Vikings, 23-7 in the New Orleans Superbowl and Col Kadhaffi became premier of Libya. That happened in 1970. 

Take a look at the graph on Housing Affordability. The definition of Housing Affordability is the percentage of a median family's income required to make mortgage payments (principal and interest) on a median priced home.  Unprecedented interest rates, low mortgage rates as well as the first-time buyer tax credit continue to contribute to improving affordability conditions.

Affordability

  • The median mortgage payment (principal and interest) in 2010 consumed less than 15% of family income in comparison to the historical standard of 25%.
  • 14.3% in 2010 is the lowest on record (since 1970). In 2003, it was at 19.1% due to significantly lower mortgage rates that year.
  • The highest price-to-income ratio ever recorded was in 1981 when it hit 36.3%. Interest rates during this year averaged 15.12%, the second highest on record after 1982's 15.38%.
  • The 20-Year Average is 20.1% & the 40-Year Average is 21.9% 
  • Many of you may be saying, "Well, I already bought a house".  My suggestion is that you may want to look hard at buying a second or even a third house given the values and interest rates and let a stranger help in your investment.  There is a good chance that a 15 year note's payment may very well be covered by the income paid by a renter.  In that case, your rental property could very well be paid off in 15 years.  Imagine if you purchased five $200,000 homes today and were sitting on no debt in a very short time.  Wouldn't retirement look a whole lot different? 

    Posted by

    Joe Sosky is the Managing Director for KW Commercial in Vancouver, Washington, as well as a developer of NNN leased properties.  Give me a call if you have a client who may want to buy, sell or lease a Commercial or Investment property.  Each month we teach people how to become a Millionare Real Estate Investor.  Our Workshops are held in Downtown Vancouver on the 3rd Tuesday of each month!  Email info@jtsinvesting for more information!

    Joe Sosky; Commercial Real Estate Associate Broker and Investment Specialist
    KW Commercial
    360-816-9652
    joe@kwcommercial.com

     

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    Location:
    Washington Clark County
    Groups:
    NorthWest Commercial Real Estate
    Tags:
    investment property
    affordability
    low interest rates
    lower values

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    Rainer
    19,904
    Diane Kawell
    Windermere Real Estate / West Campus / Federal Way WA - Federal Way, WA

    Great post Joe! Logical and good support data that did not make my eyes glaze over! This is YOUR market, as an investment specialist .. good job!  

    Mar 29, 2011 03:09 PM #1
    Rainer
    153,480
    The Richards Group
    CCP, LLC - Denver CO Home & Real Estate - Denver, CO
    JD, ABR, GREEN, SFR, Denver CO Home & Real Estate

    Warren owns a big chunk of Wells Fargo. Of course he likes real estate. He wants to replace us. Don't get too excited!

    Mar 29, 2011 04:30 PM #2
    Ambassador
    2,138,276
    Respect Realty LLC
    Respect Realty LLC - Milwaukie, OR
    Brokers - Oregon / SW Washington Real Estate

    If one of the richest people in the world is telling you to buy real estate, it would be wise to listen. There is a reason he has so much money and it isn't because he is stupid with it.

    Mar 29, 2011 06:49 PM #3
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    Rainer
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    Joe Sosky

    Commercial Real Estate Broker - (360) 816-9652
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