Billionaire Says Real Estate is Best Investment Possible

Billionaire Says Real Estate is Best Investment Possible | Simplifying The Market

Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. During his session he boldly stated:

“I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you’re the owner-occupier of.”

Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes, John Paulson is:

“A multibillionaire hedge fund operator and the investment genius.”

According to the Wall Street Journal, Paulson is:

“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”

Why does he believe homeownership is such a great investment?

Paulson breaks down the math of homeownership as an investment:

“Today financing costs are extraordinarily low. You can get a 30-year mortgage somewhere around 4.5 percent. And if you put down, let’s say, 10 percent and the house is up 5 percent, which is the latest data, then you would be up 50 percent on your investment.”

How many are seeing a 50% return on a cash investment right now?

Paulson goes on to compare the long term financial benefits of owning verses renting:

“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”

Bottom Line

Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – if you don’t yet live in your own home, go buy one.

#1 Reason You Should Sell Now

#1 Reason You Should Sell Now | Simplifying The Market

The price of any item (including residential real estate) is determined by ‘supply and demand’.  If the supply of an item is larger than the amount of people looking to purchase that item, the price will decrease.

According to the National Association of Realtors (NAR), historically there is a natural decline in buyers looking to purchase a home (also known as foot traffic) as the winter months approach. Shown in the graph below:

Foot Traffic To Decline in Winter Months | Simplifying The Market

NAR goes a step further to say that there is a direct correlation between “foot traffic” and “pending contracts/closed sales one to two months later”.

Bottom Line

The real estate market has done well to recover from the slow start we experienced due in part to the inclement weather at the beginning of 2014.  But with those winter months right around the corner, now may be the best time to get the best price.

Fannie Mae Agrees: Hire a Pro to Sell Your House

Fannie Mae Agrees: Hire A Pro to Sell Your House | Keeping Current Matters

Do you really need an agent to sell your house in today’s market? Here’s what Fannie Mae suggests to sellers on the Know Your Options section of their website:

“Select how you’ll market and list the home (e.g., with a real estate agent or for sale by owner). There are pros and cons to each, but unless you are experienced at selling homes, it usually makes financial sense to get professional help—homes sold by agents typically sell at a higher price and spend less time on the market. An agent will also help you determine the best pricing for the house, they’ll market the home, and they’ll be your advocate throughout the process.”

Let’s go over the points they made:

  • Homes sold by agents typically sell at a higher price
  • Homes sold by agents typically spend less time on the market
  • An agent will help you determine the best pricing for the house
  • An agent will market the home
  • An agent will be your advocate throughout the process

If Fannie Mae says using an agent probably makes sense, perhaps you should interview an agent before putting your house up for sale.

Buying A Home? You Don’t Need To Do It Alone

Buying a Home? You Don't Need to Do it Alone | Keeping Current Matters

Discover Home Loans conducted an interesting survey that revealed how prepared homebuyers are for the actual mortgage process.

The survey reported that 94% of prospective buyers believe they are making a good investment decision if they buy a home. The survey also explained that 66% of buyers reach out to real estate agents to help determine whether buying a certain home would be a good investment.

However, there is less certainty regarding the mortgage process.

Most buyers overwhelmed

The majority of potential buyers are actually overwhelmed with the plethora of information available about the home financing process.  Here are some interesting highlights from the report:

  • Nearly 66% feel overwhelmed with the amount of information available
  • 76% of those under the age of 30 feel overwhelmed
  • 76% of first time buyers feel the same way
  • 54% of those buyers who have previously owned also were overwhelmed
  • 59% of buyers turn to mortgage bankers to help evaluate mortgage terms and comparing offers
  • 49% of buyers turn to real estate agents to help evaluate mortgage terms and comparing offers

There is help available…use it!

Cameron Findlay, chief economist at Discover Home Loans, gives great advice:

“The industry is becoming more transparent in an effort to help homebuyers become informed about changes that may affect their process. The sheer amount of information can lead to confusion and stress. Those looking to purchase should work closely with their lender and realtor to make sure they are comfortable with mortgage terms and understand the impact a loan will have on their finances.”

Bottom Line

Purchasing a home can put great pressure on a family. Reach out to the best mortgage and real estate professionals in your market for assistance throughout the process.

A Home’s Cost vs. Price Explained

A Home’s Cost vs. Price Explained | Keeping Current Matters

In real estate there is a difference between COST and PRICE. As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not be concerned about price but instead about the ‘long term cost’ of the home.

Let us explain.

Recently, we reported that a nationwide panel of over one hundred economists, real estate experts and investment & market strategists projected that home values would appreciate by approximately 4% from now to the end of 2015.

Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30 year fixed mortgage rate will be 5.0% by the end of next year.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

The Cost of Waiting A Year | Keeping Current Matters