Navigating the Turmoil of the Financial Markets
It is difficult to find any bright spots in the economic news these days. How does that Rudyard Kipling poem go? “If you can keep your head when all about you are losing theirs…” For those who don’t panic and are prepared, there has never been a better time to fortify your financial fortress. Interest rates are still at historic lows. Now is the time to lock in those fixed rate mortgages. It seems certain that interest rates can only climb. And, even though housing prices may not have yet hit bottom, it also seems certain that we’re hovering there. The only way to know when the bottom is the bottom, of course, is when it no longer is.
There is no such thing as a national real estate market, just as there is no such thing as a national weather forecast. According to the Case-Schiller index, home values in Chicago have “only” dropped 10% from May ‘07 to May ‘08. (Las Vegas and Florida are the hardest hit with nearly a 30% drop!) In some areas (Ravenswood Manor springs to mind), values have held steady if not climbed. The first rule of real estate remains: location, location, location.
Many buyers are afraid to jump into the market for fear of over-paying. But it is not a strategy well thought-out. If prices continue to fall, it is not probable they will fall as much as another 10% (at least not in Chicago!). Yet it seems certain that interest rates can only go higher. For every 1% increase in interest rates, prices must decline approximately 10% to offset the increase in payments. So waiting for prices to drop another 1% or 2% is a false “economy”. It only ends up costing you more! For those who can “keep their head”, it’s a great time to buy!
“All Things With Exuberance!”
mary!
