Price: Does it Matter?

Mortgage and Lending with Flagstar Bank

It seems that housing prices have become quite an obstacle for  the real estate market.  Personally, I think most people need to take a fresh look at prices.  I know, I know... the price of your home is a very emotional thing, and the "media" has everyone frightened of a coming crises of Biblical proportions, but price is what it is.  It's just price.

First, let's talk about current homeowners.  The real estate market is not unlike any other market, prices go up and prices go down.  Look at the stock market.  We all know that if you make your investment decisions on every upswing or downswing, not only would we all go bonkers riding that roller coaster, but we'd end up losing money too.  Right?  Isn't that why a diversified portfolio and a long-term strategy is the most certain way to make money in the stock market?  I should know, I was an investment advisor for better than a decade.  (Man I'm gettin' old).

Employing a long-term strategy in the stock market doesn't mean you don't make decisions from time to time.  Sometimes you have to move your assets due to a number of variable reasons.  It's the same with owning a home.  The house you're living in today may be your long-term strategy, but for variable reasons, you need to make changes.  Maybe you thought you were done having kids, but now your wife is pregnant with twins.  This happens!  As crazy as it sounds, this exact scenario happened to two of my close friends (apparently the odds are better than you think).  You may change jobs, or want a different school district.  You see, sometimes you have to move your family (assets) for variable reasons.  And those reasons are more important than current market conditions to your long-term strategy, which is really, your life.

Now back in my investment days, I'd often be down 20-30% on a position, and I'd sell it to buy something else.  Emotionally, what would go through my head is "oh no, I just lost 30%".  Being a professional, I quickly reminded myself that I didn't just lose 30%, I just moved my assets from one stock that was down 30%, to another that was down 30% or possibly more.  In other words, I may have been selling at a discount, but I was buying at a discount too!  Not only that, the stock I was buying at a discount had a better potential for gain than the previous one did.  It may have "felt bad", but it was good medicine.

Maybe you need a bigger home, but you're worried you will "lose" money on your current home.   First, think about it from the perspective of what you actually paid for your home, not from what you perceive it's high point was.  The high point never matters, because in reality, it's only myth.  Most people I work with are usually up quite a large percent from purchase price versus today's (discounted) price.  They may be down from the high, but that doesn't matter.  The only thing that matters is what you originally paid.  Second, think about that new home you'd like to buy.  If you would have bought it last year, or the year before, how much more would you have had to pay?  Probably a lot more!  So you may be selling your current home at a discount, but you're picking up your new home at a discount too.  And the new home might have a better potential for gain than the old one too.

The real estate market will turn.  Markets run in waves.  What is is.  So if you're selling low, you're also buying low, and if you're selling high... guess what?  You're buying high too!  And let me tell you from my investment advisor experience, the more the "media" convinces you things are going to keep getting worse, once they have you convinced it's Real Estate Armageddon, the downswing will be over.  The "media" are always the last in line.  No offense to the many teriffic people in the news business, but they just report news, they don't actively work in the financial, real estate, etc. markets.  Their primary goal is to keep you tuned in so they can sell as many commercials as they can for the max price they can get, not to help you predict and/or navigate markets.

In summary, live your life!  If you need or want to move, then do it!  Don't let "market conditions" get in your way.  Trust me, worrying about things like that will hurt you in the long run more than it will ever help.  This is your life!  The market is just an abstract, it doesn't have a real life like you do, so don't let an abstract dictate your decisions!

Unfortunately for some people, I do understand that you really can't sell because you just bought your home in the last couple of years, and you are down too much.  Or maybe you took too much equity out while the price was sky-high.  That sucks.  It does, and there is no better way to say it, than to say that it sucks.  I feel for you.  I really do.  I'm human, and I've made even bigger mistakes than that.  Oh, well.  Keep your chin up, and have a little faith, because markets always turn, and it won't be too long before you have a whole bunch of equity in that house to roll into your new one.


A quick note for first-time home buyers:

What are you waiting for?  Are you hoping Santa Claus will drop one down your chimney?  Oh, that's right, you have to have a chimney first (they come with many homes).  The Easter Bunny? 

Let's get real here.  Talk about no time like the present!  Get out of that apartment, or out of your mom's garage, and buy yourself a home!  Now is the time.  This is the place.  You are the one. 

Any one of the amazing real estate professionals here in the Active Rain Network would be more than happy to help you.  Working with first time home buyer is a blast!  And click the link on my profile, or give me a call.  I work for an old-fashioned bank and we have plenty of money to lend.  I'm pretty creative when it comes to purchasing a home, and if you need 100% financing, that's no problem for us either, we're happy to help.  I lend in all 50 states.  End of commercial.  :-)


A Thank You:

Thanks for reading my first blog post.  I just sat and typed as I thought without editing or anything like that.  I'm a banker, not a professional writer.  My hope is I improve over time as I share more of my thoughts and wisdom (well, I think it is anyways).  I won't be on a strict blogging schedule, but I will add posts on a regular basis.  Please stop in from time to time.  You will either find me interesting or crazy, but none-the-less, it should always keep you entertained.


Next Topic:

Why Not to Worry About the Housing Bubble

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