My New Blog

It has been awhile since I have blogged.  My first blog was about the need for the FED to drop interest rates by 1%.  That they did.  Whether this keeps us out of recession will depend upon how bad the other aspects of the economy perform.  It looks like the FED will probably lower interest rates again at the end of January.  Unemployment has spiked a bit, and that shows that there is an underlying softness in the economy and you can be sure they will do what they need to do about a recession in an election year.  But it will also help the sting of the ARM adjustments.

At this point in our area the market has been soft.  Median prices have remained pretty constant, but median prices are deceptive because it only tells us what people are paying and not what they are getting.  Clearly from doing appraisals in the area people are getting more for their money.  And list prices in some parts of Northwest Wisconsin are coming down to attract buyers.  There remains a significant over supply, and ironically there are still some people out there building spec homes.  Go figure.  But I have seen list prices drop by ten to twenty percent.  So sellers are getting realistic.

Is it a good time to buy?  My son just bought a home in Minneapolis.  It was originally listed above $300,000 and he bought it for $232,000.  He was wondering if they should wait.  I told him that if I knew when the bottom would hit I would be very rich.  The approach to buying should be this:

1)  If you are believe the price is fair compared to what else has sold, and you plan to live in the house for over three years, then buy.  The housing market will most likely be back on its feet and you will have built up enough equity in three years that if you needed to sell you would come out on the positive end.  Otherwise you should rent.

2)  Interest rates are historically low.  Who knows if they will always be this low.  Sieze the day.

3)  Remember that when you buy a house you are buying a home.  It is first and foremost a place to live.  Yes it is an investment.  But it is a long term investment.  The days of buying a home one year and then selling it the next year for 20% more are over for a long time in the midwest.