I was talking with a gentleman the other day who commented that he didn’t think he wanted to purchase at this time because he expected real estate values to continue to go down.  That was his opinion, not mine and to be truthful, he said that because he had a net “zero” gain on the sale of his house. Truthfully sad … but I believe it is skewing his thinking.

Anyway .. it got me considering whether his reasoning (e.g., real estate is a bad investment right now) was accurate financially.  I say that because I look at the real estate market right now and think the absolute opposite.

Prices are back to 2007-8 levels and interest rates are so DARN low right now (4.25% was the last quote I got for a 30 Year, fixed, 740 credit score, 80% LTV). In my mind, real estate seems to be an AWESOME investment right now!

There are two issues that need to be considered in looking at real estate as an investment:

First, what can I get for my money right now? Is that more or less than what I am expecting for the future? Most people translate that into monthly payment. If I only have $1000 per month to spend right now, how much can I get for that $1,000 now?  How much will $1,000 per month get me in the future?Second, when the time comes for selling, will I make money or lose money when I get to the closing table?

My assumptions are:

Interest rates or at or near their lows. I am expecting interest rates to rise over time due mostly to the fact that prices generally are rising.  Any one who buys groceries or gas on a regular basis knows that prices are increasing. I believe that we have artificially low rates right now. My assumption is a 2% increase in interest rates during the next 2 years. I don’t know that for sure, of course, but that is my assumption.  Also, as interest rates increase, prices will also increase.  Historically, that is what happens in real estate.

Let’s look at an example:

For a $100,000 home loan, a 2% interest rate increase (from 4.25% to 6.25%) would cause the principal and interest payment to rise from $491.93 to $615.71 per month. That is equivalent to a 25% higher monthly payment meaning that I will have to pay MORE for the same house in the future.

To keep the current monthly payment of $491.93 even though the rates are higher, you would only be able to afford a $80,000  home loan. That is 20% less house. OUCH!

Annually, the outlay from the higher payment would be about $1500.  In 2 years, that would be equivalent to $3,000 more in payments. Thus, if you look at these figures by themselves, it would seem that you would “lose” so to speak with real estate if you are expecting prices to drop by more than 3.00% during that 2 year period … let’s say 5%.  So, if I am expecting the sales price to be $95,000 in two years, I would have lost a net $2,000. Is that right?
My answer is DEFINITELY NO!!! What you must keep in mind, however, is: What could YOU buy in 2 years if you kept your $100,000?

First, just as an aside, you would have not had any ownership in a home. No tax benefits! Just lease payments which are higher than they have been in a long time.

Second, if you still only have $491.93 per month to spend on principal and interest, you would only be able to afford an $80,000 house. Even if you compare that with the $95,000 you THINK you would have sold your house for, that’s an 18% loss. Doesn’t sound like a wise choice financially!  Also, as I stated earlier, historically, home prices usually rise as interest rates rise.  So, what you could afford, probably would be even less than the $80,000.

For those who invested in the last 4 years, there truly has been a big hit! No question there!  What needs to be kept in mind is the reason for that hit … the housing bubble and stupid mortgage practices. You know the old saying … Hindsight is 20/20. It would have been great if we all knew that the bubble was going to pop.

Historically, real estate has been a great investment. Right now, we have this amazing phenomenon of having both low interest rates and low prices. We feel like it is an AWESOME time to invest in real estate and hope that this analysis will get you thinking along the same lines as well.

To find out what is on the market right now, return to the main page and choose your search area.  We’d love to help you invest in the Texas Hill Country.  Our number is 830-995-2511.

Girls Night Out

An old fashioned holiday spirit awakens in the tiny town of Comfort .

Grab your girlfriends and join local merchants for a magical evening of shopping and yuletide refreshments!

Tuesday, November 15

4:00 pm – 9:00 pm

Fabulous door prizes

814 A Texas Bistro

Accents and Flowers

Antiques on High

Antiquities, Etc.

Blackbird Antiques

Comfort Antique Mall

Comfort Candle Company

Comfort Cellars Winery

Comfort Common

Comfort Crockery ~

Comfort Stampede

Cypress Creek Antiques

High’s Café and Store

Juniper Green Antiques

Kat’s Unique Gifts

Stuff ‘N’ More

Sweet Comfort

The Plaid Goat

The Heart Cottage

The Tinsmith’s Wife

Turkey Ridge Trading Company

Wilson-Clements Antiques

Residential Real Estate Sales for the first 4 months of 2011 improved slightly over last year. 84 Sales vs. 81 last year. Also showing improvement was average sales price which increased from $314,055 to $319,152.

2007 was the height of the market.  The market is currently down about 40% from that point.  Sales are taking more than twice the time to sell and are selling at a deeper discount from original list price than that time period.

Thankfully, the sales curve is finally on an upswing. We have noticed that the number of distressed properties are decreasing. Inventory, however, is increasing daily.

It will be interesting to see how this year plays out … whether sales will grow stronger and eat up the inventory or whether inventory will not be absorbed and a “glut” by year end will create more distress situations.  We remain optimistic … but are ever watching the market to stay abreast of the situation.  For all of your real estate needs, give us a call.

Sales in Kerr County are finally on their way back up. The total real estate market is only at 52% of the market height in 2007 but is up 11% from last year. The average sales price increased slightly from $181,742 to $183,095.

It is our feeling that the market has not recovered as much as in adjoining Kendall County because there have been fewer “deeply discounted” properties. With so much on the market, buyers are looking for “deals.” If a property doesn’t “shine” next to its competition and truly feel like a “deal,” savvy buyers will pass for the next more appealing property. The moral: Property pricing is more important than ever!

Regardless, we are encouraged by the turn in the trend. We’d love to talk with you about YOUR real estate needs. Give us a call at 830-995-2511.

If in all the wonder you start to work up an appetite, count yourself  in luck because you’ve saved the best for last … The Camp Verde Cafe .  The food always makes a lasting impression with every thing on the menu under $7 …  always fresh and delicious.

My personal favorite is the “Ooh La La!”   Grilled roast beef, Swiss cheese, grilled onions and garlic mayo on ciabatta bread with au jus ($4.75).

After your meal, take a walk across the street to the park where you can enjoy wonderful Verde Creek (one of the nicest creeks in the Hill Country) or just enjoy the elements sitting at the picnic table with friends.  Perhaps a game of  dominoes?  Check back soon for more Hill Country hot spots and things to do!

On the other hand, residential sales are down so far this year. As I quickly look through the residential sales so far in 2010 (14 so far compared to 16 last year during the same time period), I am reminded that many of them were at deep discounts from original list price. The average list price to sales price ratio was 88.4%

As for the outlook for THE ENTIRE HILL COUNTRY for the balance of the year, here are some things to consider:

Tax rates are set to increase next year. Current land owners: This year may be an opportune time to realize gains on real estate at lower tax rates.

There is currently a “glut” of residential properties on the market.  Since there is so much competition, homes that are “average” just aren’t selling.  Prices are being reduced time and time again in order to get market attention. As such, we believe that by end of year there will be some great “buys” on homes that need a little TLC.

We’d love to serve you whatever your real estate needs are.  We work from Leon Springs to Mountain Home, Bandera to Johnson City.  Give us a call!

The average home price in 2008 was $220,921; in 2009, it was $223,123, and in 2010, it was $199,996.  Those figures, in our opinion, represent what we have been seeing happen.  In 2008, sales were still strong and prices were at their height.  In 2009, sales were off, but prices were not coming down like one would expect.  During 2010, prices are definitely lower.  We have been telling our clients that prices are down by about 10%.  These figures substantiate that information.

We feel like it is a really good time to buy.  Prices are down and interest rates are still low.  If you have been sitting on the sidelines waiting for the right time, now is the time to jump in!  Give us a call. We’d love to help you find what YOU are looking for.

Not surprisingly, real estates sales were down in the Kerrville area during 2009. There were 442 sales in 2009 totalling $80.013 Million as compared with 512 totalling $99.687 Million in 2008.  Average days on market increased from 174 days in 2008 to 188 in 2009 and Average List/Sold Price declined from 94.33% in 2008 to 92.33% in 2009.  Overall, the market was down 20% for the year … No surprise given the economic slowdown last year.