Pura's Blog

Below is a link that demonstrates the progression of delinquencies occurring across America.   

 http://online.wsj.com/public/resources/documents/retro-HOMELOAN07.html

We are all suffering from the economic downturn. The fact that the daily cost of living is increasing and the paycheck is shrinking is a reality, but the only way to combat the high costs is to rethink how you live.

Is a daily stop at Starbucks part of your workweek routine? $3.99 x 5 = $1,037.74 per year

Do you plan your errands or do you run errands impulsively? Filling my gas tank this morning, the reality of $4.15/per gallon really hit home.

When looking at trimming cost – think or rethink: are you an impulsive shopper? Do you use coupons for purchases, groceries, car repairs? Have you mailed in store rebates – if applicable? Do you price shop? Are you paying for a gym membership, but don’t use your membership?

Most households can trim and/or save thousands of dollars per year just by rethinking daily expenditures, comparative shopping and/or running errands systematically.

Have you heard the quote, “A penny saved is a penny earned.” Benjamin Franklin understood the concept of watching your pennies in order to build wealth. You might be wondering how these ideas translate into home ownership. Well, savings is paramount. Lenders are no longer extending credit/loans to those who are not creditworthy. Moreover and most importantly, learning to save creates the habitual practice of cutting costs. As a homeowner or potential homeowner, you must be diligent in maintaining a budget. Turning off lights when you leave a room, insulating your home, energy efficient appliances, etc., are all ways to reducing home costs. However, reducing costs does not mean you use those funds for discretionary spending. You need to ‘pay’ your savings account before spending those savings frivolously. Instant gratification is exactly that - instant. As soon as you purchase an item, it is no longer ‘new’; it is technologically outdated, and it loses its shine. Savings is real. It has a long term affect and is much more rewarding, especially when a life crisis occurs. Remember: You need to run your finances; not your finances running you.

I am often asked, "Is this a good time to Buy?" or "Do you think the housing prices will continue to go down?"

I will address the questions respectively. 

Is this a good time to buy?  This is a wonderful time to buy.  The market has experienced a major correction and the mortgage interest rates are low.  The key to buying is to identify your needs and buying within your means.  Ask yourself: what can I afford? What size home do I need now and in the next five years? What neighborhood would I like to live in?

The next step is to begin preparing.  Go to your bank and get pre-approved for a mortgage.  Why is this important? Well, once you locate a property, you are ready to put in the offer.  Being pre-approved shows the Seller that you are serious.  It provides some leverage.  It shows you have done the leg work and are ready to buy.  Moreover, being pre-approved is the tell of the tape - you will know what you can afford.  It streamlines your property search to meet your financial parameters.

Do you think the housing prices will continue to go down? This question is the million dollar question or, more appropriate with the sub-prime fallout/bailout, the billion dollar question.  I do believe that there will be a further correction in the market due to increased housing inventory coupled with tightening lending practices by financial institutions.  That is not bad - that spells opportunity for qualified buyers. Remember, a pendulum swings both ways. If you wait for the pendulum to swing the other way, you are following behind the curve of correction and it could mean a missed opportunity.

There is no way to predict the bottom of any market.  Even the economist and Wall Street analysts are unable to definitively determine how deep a cut the market will take.  Why? there are too many variables - job sector, core price index, consumer confidence, consumer spending, etc..  However, the fact remains that land is finite and we have an ever growing population.  As with all limited resources, when demand increases and supply is limited, the price goes up - economics 101.  

That is why I say, BUY! Or in the words of Jim Cramer, [Mad Money] Booyah - Buy, Buy, Buy

Everyday news comes out that the real estate market is doing poorly...well, it's true.  But, the reason the market has taken a dive is due to a multitude of reasons.  Lenders gave "pulse loans" - if you had a pulse , you got a loan.  Homeowners were cashing in on skyrocketing property values by refinancing and believing the bubble would never burst.  Builders over saturated the market.  New construction was like weeds - cropping up everywhere.

With the advent of cable shows demonstrating only the upside of "flipping" a property, the philosophy of homeowners changed. 

This might seem like a news flash, but there was a time when people purchased a home, because they really loved the home; they wanted to raise their families in the home; they wanted goods schools for their kids; they planned to retire and, at some point, pass on the "family home" to their children.  

A home should never be a mere investment or an ATM machine.  A property becomes a home when you develop memories that remain with you for a lifetime, such as a special celebration, a backyard barbecue with neighbors, etc. 

As all markets suffer from cyclical changes, we are now experiencing a correction in the real estate sector.  However, the real estate market has proven to be a solid investment - an investment in family and community.  The financial aspect hasn't been too shabby either.