It’s this fantasy about a house that leads to irrationality, and that drives us to make bad decisions. By that we mean decisions that cost you money needlessly. That said, buying a house and building equity is one of the best investments anyone can ever make. All things being equal, it’s better to own than to rent. With property prices down, interest rates at a low and some desperate sellers, there is no doubt that there are some excellent deals out there. But if you follow these simple rules as a guideline, and drop the sentimentality and pride, you’ll be better off.

Treat it like any other investment

So you’re thinking of buying. The first thing you need to do is lose the sentimentality. The joy of owning a house is not a factor yet. Like any analysis, we have to start with the basics. When dealing with possibly the biggest expense and investment most people will make in their lives, it’s bizarre to think that many people will put together household budgets that analyze what kind of breakfast cereal they buy, but will throw thousands of dollars away on their houses, all in the belief that it just goes with the territory. There are many additional expenses other than the mortgage payment that go hand in hand with owning a house. Get them all down on your spreadsheet when starting to think about buying.

Think about it as a buy-to-rent to gauge its relative value

The only simple way to determine if it’s a good idea to buy or rent is to not think of the house you want to buy as one you’ll be living in. If you think of it as a buy-to-rent piece of property, all of the dynamics of the market become easy to interpret, and we can leave emotions aside. Sentimentality out the way, we can get scientific and do our math.

Let’s say you bought the place you’re looking at with cash. What can you rent it for? What are the taxes, the insurance, the maintenance costs and the management fees? Deduct these from your annual rental income. This magic number (less a month or two’s rent in case of vacancy) is your net rental income. Divide this net rental income by the cash price of the house, and you’ve got your return, called the capitalization rate by people who write for The Wall Street Journal.

That’s it — we’re done. If this capitalization rate is less than the rate you could get on a less risky investment, like a high-grade bond, we suggest you either sell (if you already own the property), or keep being a renter. That’s the simplest way to look at it. Now we can consider some twists.

What’s the market doing?

This is unfortunately not as simple as people make it out to be. If prices go down, more people buy. This pushes prices up. The more people are buying, often the cheaper rentals become. Thinking about your investment on the buy-to-rent basis as described above help makes sense of this all, if only because you can, to a large extent, ignore these dynamics. If the values of properties are going up, rental incomes should too. And if they aren’t, you’re at risk of floating around in another bubble.

Can you make the deposit?

Start by talking to a Lender!  This is key!!  There are so many programs, including Government  backed incentives (tax, etc…) that can help you at the start!!!  If you have zero down, low paying job – then reality needs to set in!  Maybe the idea of buying a home is there, but resources are not.  A great measure if you are ready to buy is how much can you put down?  As a rule of thumb, if you can’t put down at least 10% of the purchase price as a down payment on the house, you shouldn’t really be thinking about buying today… but start planning and looking towards tomorrow!

buy smart

Like with any investment, the discussions can and should get a lot more in-depth.  I hope to have gotten the ball rolling in that direction for you!

If I did, please give me a call so we can talk more about this!!  I can be reached at  208-288-2976 or at paul@Idahorealtyinfo.com.

I look forward to talking to you soon,

Paul Wallin
Idaho Realty Info at Group One

The Federal Reserve’s program of purchasing a total of $1.25 trillion of mortgage-backed securities is supposed to come to an end on March 31^st of this year.  The general consensus is that the Fed’s involvement in the market means that conforming fixed-rate mortgages are perhaps 75 basis points (0.75%) below where they would be if the program did not exist.

This means that you should expect interest rates to rise somewhat when the program expires.  For example, if you bought a House for sale in Eagle Idaho, with a $400,000 loan over 30 years, a .75 increase could result in as much as $70,000 additional in interest!  How much rates rise will depend on whether or not private investors will want to buy these investments, and how strong that demand will be – is all quite foggy at this time.  It’s best to plan for at least some increases in interest rates as the end of the program approaches and for a period of time after March 31, with perhaps as much as a half-point rise to start.

Want more information, give me a call at 208-288-2976 or email me at paul@Idahorealtyinfo.com and we can talk how this can affect your long term real estate plans.  Or, visit my website at www.idahorealtyinfo.com for more information.

Boise Home Sales, Eagle Home Sales, Meridian Home Sales… it’s doesn’t matter where!

Let’s talk plain English here… as I think you’ll agree, it’s simple to see;

• A few years ago, loans were given out like candy… just ask and you could get it!  Too many people were allowed to purchase homes that were far beyond their means should life change.

• When the economy dipped many of those people either lost their job or had their salaries slashed.  Life changed.

• Home values continued to slide down, mainly because new homes coming on the market were “Short Sales and Foreclosures”.  The volume of clearance rack homes reduced the overall average… and home prices slid fast!

So these three big factors;  Bad Loans, Economy Dropped, and Home Values Sank created a correction, a much needed one (but not wanted!)

Here’s a fantastic graph that shows this to you visually.

Look at that graph (click on it to make it larger) and notice the Yellow Box.  This graph goes back to the 1890’s… but in recent times (we’ll say 1970 and forward), you can see that every 5 years there is a correction.  It’s very noticeable with the peaks in 1979, 1989, and obviously in 2006 (give or take a year there).

The economics behind making money is simple:  Buy Low, Sell High.

Real Estate over the course of time has been a solid investment! But, if you bought in 2005 and want to sell now… that’s the problem.  And if you can afford it now, even a bigger problem!

So ask yourself again.. What state are we in – in Idaho Real Estate??

I can tell you… WE ARE IN THE HOME BUYING MODE!!! The time to buy is now!!  Why?

• LOW Interest Rates
• TAX Credits
• Opportunities to purchase homes at reduced values with a selection of inventory to choose from!

If you’re a homeowner: In years to come you’ll make up the loss on the property you sell today, you’ll live in possibly a newer home, maybe a nicer home, and most likely will pay less which to me equals… you’ll make out better in the long run!!!

If you’re an investor: Take advantage of great properties in areas that have rebounded and I’ll show you the cash flow!!  For those who have the opportunity, now is the time to buy for your future retirement!

I buy and sell homes in Meridian, Eagle and Boise Idaho!  I’m a keen observer to trends , to analyzing values, and the especially paying attention to detail!!

Call me at 208-288-2976, or email me at paul@idahorealtyinfo.com to set-up a “REAL REVIEW” and let me help you find out where your next Real Estate opportunity lies!

A new market will soon open to those individuals who want to buy the low cost Meridian and Eagle, Idaho Homes with the purpose of fixing them up and selling them!!  There is plenty of inventory of Meridian, ID foreclosures in disrepair and repairing them could be made easier!!

There will be new rules in place to prevent predatory practices. First of all, deals must be “arms-length:” The parties in the sale can’t have the same interest.

This is designed in part to prevent homeowners from defaulting on a loan, then bringing in a friend to buy it from the bank at a rock-bottom price and return it to the homeowner at a slightly higher-than-rock-bottom price. In that scenario, the friend/flipper would make a profit and the homeowner would have a cheaper mortgage, all at the lender’s expense.

Another notable restriction prevents sellers from knocking the new price up more than 20 percent from its purchase price, unless an independent appraiser says the renovations justify that increase.

As long as you are renovating and selling houses is a “legitimate business activity, as long as they’re not turning around and making a substantial profit after beating up the bank for a low price.”

And since FHA loans have come to play an ever-more-important role in homebuying in the last two years, being allowed to sell to FHA buyers makes house flipping a lot more attractive.

If the short-sale proceeds were not sufficient to payoff their existing mortgage then they would not be eligible for new FHA financing.  They would be eligible for new FHA financing if the proceeds were sufficient to payoff their loan and they were current with their payments at the time of the short-sale.

Click here for FHA Shore Sale detailed information

Time: 5 minutes per window
Difficulty: Moderate
Expertise: None
Frequency: Once a year

Caulking and weather-stripping around doors, windows and electrical outlets block the cold drafts that drive up your heating bill and make your home less comfortable. Add them if they’re missing from key spots, and repair and replace caulk and weather-stripping that have worn out.

You can use a candle, smoke pencil or tissue hanging from a hanger to check for drafts — you just need something that moves in a slight breeze.

You can either add or replace caulk and weather-stripping yourself or have an expert do the work for you. You can do interior caulking at any time. Wait for warm weather to do exterior caulking, or call a professional who has the equipment to do exterior caulking in the winter.

Many types of weather-stripping are available — foam, felt, plastic or metal — so check the packaging to determine which is best for your application:

∙ Foam weather-stripping acts like a gasket that squishes when a door closes on it.
∙ Metal or vinyl weather-stripping is typically folded and is compressed by the moving parts like a spring.
∙ A combination of metal and vinyl creates a door sweep or door shoe, which fits on the bottom of a door and creates a good seal when the door is closed.

Steps

1. To locate drafts near windows, exterior doors and electrical outlets on exterior walls, slowly move the candle, smoke stick or tissue all the way around them.
2. For drafty doors, install weather-stripping if there is none. Inspect existing weather-stripping for damage, and repair or replace as needed.
3. For drafty electrical outlets, install a foam gasket under the cover plate of drafty electrical outlets. They’re inexpensive and easy to slip into place.

1. For drafty windows, you can caulk the interior at any time. Only apply exterior caulking when the weather is warm, or call professionals who are equipped to apply caulk in the cold.
   • Gently scrape off any existing caulk. If the gap under the caulk is damp, let it dry.
   • Load the tube of caulk into the caulk gun — use acrylic latex silicone caulk for best results. Cut off the tip of the nozzle at about a 30-degree angle; make the hole the same size as the gap.
   • Place the nozzle at one end of the gap. Using steady force, push the gun’s plunger until the caulk begins to come out of the tube.
   • Drag the tip along the gap steadily to create one continuous bead — don’t start and stop.

Time: 2 minutes
Difficulty: Easy
Expertise: None
Frequency: Periodically throughout the winter

The gas meter has a regulator to ensure that excessively high-pressure gas does not enter your home. Ice can obstruct the vents on the regulator, causing it to malfunction.

If the meter is iced up or buried in snow, contact your gas utility. Do not attempt to chip the ice off the meter, which could damage the meter and cause a gas leak.

The supply of homes in the Treasure Valley market is now the lowest it has been since mid-2006!!

Real Estate Professionals and builders would like to see the supply tighten even more.  But they say the market still has plenty of good deals for first-time buyers and for repeat buyers who want to “move up”.

For homeowners trying to sell, the latest news is good and bad.  Sales are increasing, and the average number of days properties sit on the market has dropped from the mid-90’s to the mid-80s.  But median prices in Ada County fell nearly $8,000 from September to a level not seen since 2003!

The increase home sales in part reflect opportunities for buyers like the $8,000 first-time home buyer tax credit, lowered home prices from short sales and foreclosures and low interest rates.

A new law signed last week will extend the temporary tax credit for first time home buyers, which was set to expire Nov. 30.  The extension should continue to spur consumers.  And, an additional tax credit of up to $6,500 for repeat buyers who have lived in their home for five of eight consecutive years should fuel additional sales.

The number of single-family homes listed for sale is down from two-year highs of 5,098 in June 2008 in Ada Count and 2,765 in July 2008 in Canyon County.  It’s in the range of the four-year lows of 3,195 homes in Ada and 1,373 home sin Canyon – both in May 2006, shortly before the Valley’s housing bubble began to burst.

There is an estimated seven-month supply of homes – the amount of time it would take to sell them if no new housing were added – while Canyon has about eight-months’ worth.  A normal supply is about four worth.

So… what does this mean to you and I??  With interest rates low – its making it a better time to sell your house!!!!  Do you know what your home is even worth in today’s market?  If not, contact Paul Wallin, Realtor for Idaho Realty Info at Group One (208-288-2976 or paul@idahorealtyinfo.com) and let him do a Market Analysis on your home.  You may be surprised that your home is worth more than you thought – and the opportunity to sell and move-up is a very viable option!!!

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.