Michael Saunders & Company has earned a strong reputation over the last quarter-century for responding to customer needs and for creating sales initiatives designed to meet those needs. They have compiled a long roster of satisfied customers and buyers during the last 30 years. They are an established, recognized company that has been built one transaction at a time. Over time, Michael Saunders & Company have added several divisions in direct response to our desire to serve the changing needs of our customers, including commercial sales and property management, new home sales, relocation, corporate management, mortgage services and a luxury concierge service.

 

Trash Talking the Market
by Michael Saunders & Company on September 23, 2010

 

Brett Arends has had it up to here with all the trash talk.  “Enough with the doom and gloom about homeownership,” Arends, a real estate reporter for the Wall Street Journal, says in his latest column entitled “10 Reasons to Buy a Home.”

The housing market has seen troubled times.  But when Time Magazine announced in a recent cover feature that owning a home “may no longer make economic sense,” Arends decided to draw the line against such rubbish.  In his article, he chastises Time for blatantly contradicting a cover story it ran at the height of the boom.  That story “Home Sweet Home” celebrated the real estate boom even as it cheerfully posed the question:  “Will your house make you rich?”

Is it any wonder then why buyers are totally at sea about whether to purchase a home in today’s market even though all indicators say there’s rarely been a better moment in time?

Arends then proceeds to set the record straight with ten well-grounded reasons why owning a home is a very good thing.  Here are his “Whys:”

You’ll get a great deal. Many buyers sped-up their purchases to take advantage of the first time home buyer tax credit, creating a temporary shortage of home buyers once the deadline passed.  With new buyers steadily creeping back into the market, determined sellers are more than willing to come to terms.

Mortgages are cheap. 30-year fixed-rate loans bear the lowest interest rates in recorded history.

You’ll save on taxes. You can deduct your mortgage interest and real estate taxes from your itemized federal taxes.  You’ll also get a tax break on capital gains when you sell.  For many, these tax savings make owning a home much less expensive than renting.

It’ll be yours. You can have all the space and privacy you typically lack as an apartment dweller; and it will be all yours to improve as you please.

You’ll get a better place to live. Want a better home in a better neighborhood? You’ll probably have to buy it.  Rentals like these are hard to find.

Home ownership is a hedge against inflation. Long-term home ownership tends to beat inflation by a couple percentage points each year.

It’s risk capital. When the economy rebounds, real estate prices will climb again; which will make you awfully glad you bought when you did.

It’s forced savings. Your monthly rent is deposited into someone else’s bank account.  Your mortgage payment helps build your own wealth through home equity accrued over the long term.

There’s plenty to choose from. Inventories are declining.  But there is still a good selection of homes at great prices.

Sooner or later supply and demand will balance out. With the population forecast to grow by 100 million over the next few decades, roughly 40 million newly-formed households will be looking for homes. In the shorter term, with “Baby Boomers” retiring en masse, Florida will see more than its fair share of newcomers.

For more than ten years, real estate expert Steve Harney has kept a running comparison of the return on investment that real estate enjoys versus other traditional forms of investing. That comparison, shown on the  graph below, speaks for itself.  Even with all its recent woes accounted for, on average $100 invested in the real estate market back on January 1, 2000 would be worth $143.40 as of June 30, 2010; compared with $90.10 for the Dow, $80.90 for the S&P and $53.60 for NASDAQ.

If you are thinking about purchasing a home, don’t let negative or sensationalized headlines be your sole persuader.  Even journalists who write many of the stories behind the headlines are rebelling against the idea that real estate is on its way out as the foundation of many Americans’ wealth.  We’ve certainly had our ups and downs over the years, but that’s expected in every investment’s cycle.  As Arends suggests, we are getting much closer to a sustained up cycle.  Read as much as you can from the sources you trust.  That way you’re most likely to make the right decision for you, and with confidence.   Above all, don’t let trash talk rob you of one of the most opportune moments in real estate history.

Surviving the Headlines
by Michael Saunders & Company on September 15, 2010

Ominous, hand-wringing headlines greeted the news late last month that July home sales across the U.S “hit the wall” after the First Time Home Buyer Tax Credit expired.   These gloomy headlines—which are virtually guaranteed to continue unabated between now and the end of the year—paint a very confusing picture of our local real estate market; which, by all accounts, has been on a solid footing throughout most of 2010.  Yet the slowdown in sales affecting July—the first month of recorded sales since the tax credit expired—is hardly indicative of the housing backslide that many of the accompanying news stories seem all-too-eager to suggest.

Virtually everyone who follows the market—from pundits and prognosticators to reporters and REALTORS®—knew instinctively that a slowdown in sales was inevitable in the wake of the tax credit’s expiration. So why all the shock, anguish and second-guessing about the state of our market’s health now that actual sales have borne out these expectations?   Any effective purchasing incentive—such as the home buyer tax credit or last year’s successful Cash for Clunkers program for car buyers—typically inspires consumers into immediate action who might otherwise have acted more leisurely.  The tax credit essentially allowed us to borrow against future buyers at a time when sales were urgently needed to help stabilize the market.

As expected, sales fell off in the weeks immediately following the tax credit’s cut-off.  It happened after phase one of the credit expired, then again after its extension expired; largely because buyers acted appropriately.  They stepped-up in a sped-up time frame to take advantage of a significant tax credit simultaneous with the lowest home prices of a decade; not to mention the lowest mortgage rates in recorded history.   In the process, they chewed up a sizeable chunk of our bloated housing inventory.

Of course, moving their purchases forward meant that the pool of available buyers for properties after the tax credit would undoubtedly shrink, albeit temporarily.  No surprise there either.  There’s no better evidence that the tax incentive helped stimulate much-needed property sales on a broad scale than the nationwide paucity in closings that occurred immediately after it expired.  Meanwhile, the pool of active buyers is gradually replenishing itself as we approach the first quarter of 2011, which is predicted to experience much healthier unit sales.

So why all the worrisome headlines about the real estate market taking a giant step backwards after such a promising first half of 2010?

Could they have anything to do with the fact that July 2010 sales looked all the worse for being compared with sales from the same time last year?   We daresay that the gap between the two years wouldn’t have been as wide if this July’s sales—the first month absent an official government stimulus—weren’t being compared to a year ago when thousands of buyers were scrambling to take advantage of a very effective one.  Is it truly indicative of the overall health of our market to form a diagnosis based on comparing two such vastly different sales environments?  These are two extremes in search of a healthy middle ground.

The numbers do show that there are still plenty of buyers actively combing our market for whom low prices and unprecedented interest rates are all the purchasing incentives they need.

Tax credit or no tax credit, buyers are still buying; as evidenced by the 10,000 homes that sell every single day across the U.S.  10,000 yesterday, 10,000 today and 10,000 tomorrow. Though a great deal of housing demand was quenched for the time being thanks to the tax credit, it is expected to ramp up again in the New Year.  This will occur almost naturally because people buy homes and form new households for reasons over and above great prices and one-time tax breaks.

A recent study shows that price, though definitely a key component of every purchasing decision, is only one concern of the average home buyer.  Buyers also act in order to provide better, more secure accommodations for their families, to live in a preferred neighborhood or community; or to satisfy a long-term lifestyle goal, such as retiring to Southwest Florida.  Renters typically become buyers to wrest greater control over their environment, to have more living space and a yard for their children to play in; and yes, because in today’s market owning a home can be substantially less expensive.

We advise no one to ignore the news, so much as keep it in its proper perspective.  Read between the lines and draw your own conclusions about the relative health of our real estate market.  Sales will gather momentum again as new demand rushes in to replenish that which was satisfied during the great tax credit buying spree.  All we have to do is survive the headlines.