Friday, January 27, 2006
Investments 101
http://www.topteamweb.com
No one can honestly predict the future. We never did and never will, even in this very hot market. We only use past performance as an indicator of future projections. On occasion, there may be an annual renter using a unit on the market. We can then run those annual projection figures more accurately. Sometimes the unit was never rented and only bought for price appreciation. We then look at comparable units that have a rental history and make comparisons. Remember, no one can guarantee the amount of renters and the rental income for any particular unit or it's price appreciation in the next two or three years.This has been a very satisfying ride for investors.
You've probably experienced a solid improvement in your real estate market for the past 2 to 5 years. Many ask us, "How long will this rise continue?" When it comes to answering that question honestly, I remember Alan Greenspan calling the stock market "Irrational Exhuberance" It took over a year for his prognastication to fulfill itself. I can't say with certainty that I have all the answers for you. But I can tell you that I see some things happening in the marketplace that propel me and my partners to pay close attention to.I've been Realtor for over 20 years, combining my partners - we have over 100 years experience. In market upswings, people sometimes get a little dizzy counting their future profits. No one can say for sure where the real estate market is headed, but when the market is inundated with so many people thinking that all they have to do is purchase any property and they'll make easy money on the appreciation, this could be a warning sign. It even more important now for investors to exercise caution and work with experienced buyers agents.
Despite the fact that home prices in the United States have achieved record levels, the percentage of people's equity in their homes has never been lower. While people have been experiencing record levels of appreciation in their homes, they've also been taking the equity out through lines of credit and second trust deeds for both living and other expenses, too. While people have been stretching to afford the home they want at these current prices, many of them have also been financing their loans with variable interest rates. If and when interest rates go up, these people will be caught making much higher mortgage payments than they are right now. And some of these homeowners got into their loans at artificially low "teaser" rates, too, meaning that their interest rate will be increasing in the months and years ahead even if market interest rates remain the same. But if interest rates go up, these people will get hit with both the increase they knew was coming, plus another increase in their variable rate because of the changing market conditions.
Some real estate appraisers have been publically stating that they're under pressure to justify continued higher prices in their appraisals, and the government is now demanding answers from some. If they put pressure on appraisers to be more conservative it could begin to curb a hot real estate market.
No one can honestly predict the future. We never did and never will, even in this very hot market. We only use past performance as an indicator of future projections. On occasion, there may be an annual renter using a unit on the market. We can then run those annual projection figures more accurately. Sometimes the unit was never rented and only bought for price appreciation. We then look at comparable units that have a rental history and make comparisons. Remember, no one can guarantee the amount of renters and the rental income for any particular unit or it's price appreciation in the next two or three years.This has been a very satisfying ride for investors.
You've probably experienced a solid improvement in your real estate market for the past 2 to 5 years. Many ask us, "How long will this rise continue?" When it comes to answering that question honestly, I remember Alan Greenspan calling the stock market "Irrational Exhuberance" It took over a year for his prognastication to fulfill itself. I can't say with certainty that I have all the answers for you. But I can tell you that I see some things happening in the marketplace that propel me and my partners to pay close attention to.I've been Realtor for over 20 years, combining my partners - we have over 100 years experience. In market upswings, people sometimes get a little dizzy counting their future profits. No one can say for sure where the real estate market is headed, but when the market is inundated with so many people thinking that all they have to do is purchase any property and they'll make easy money on the appreciation, this could be a warning sign. It even more important now for investors to exercise caution and work with experienced buyers agents.
Despite the fact that home prices in the United States have achieved record levels, the percentage of people's equity in their homes has never been lower. While people have been experiencing record levels of appreciation in their homes, they've also been taking the equity out through lines of credit and second trust deeds for both living and other expenses, too. While people have been stretching to afford the home they want at these current prices, many of them have also been financing their loans with variable interest rates. If and when interest rates go up, these people will be caught making much higher mortgage payments than they are right now. And some of these homeowners got into their loans at artificially low "teaser" rates, too, meaning that their interest rate will be increasing in the months and years ahead even if market interest rates remain the same. But if interest rates go up, these people will get hit with both the increase they knew was coming, plus another increase in their variable rate because of the changing market conditions.
Some real estate appraisers have been publically stating that they're under pressure to justify continued higher prices in their appraisals, and the government is now demanding answers from some. If they put pressure on appraisers to be more conservative it could begin to curb a hot real estate market.
