ST. JOHN VALLEY - Since the fall of 2008, there has been much news about the very bad economy and the large number of persons who have lost their homes or who expect to lose their homes to foreclosure. The bust in the housing market has been created from the buying of homes by persons not financially able to buy through subprime mortgages, which the federal government encouraged lenders to give to unqualified buyers. Consequently, prices of homes have dropped as foreclosed homes go on the market. Mortgage rates have dropped as the Federal Reserve has kept rates low in order to improve the slow economy. However, not all of this bad news should discourage any persons from buying a home, and today may be the best time in a long time for many persons to achieve the American dream of home ownership. The median sales price for homes in Maine increased by 4.27 percent to $169,750, comparing August 2010 compared with August 2009, showing a continued increase of home prices in many areas of Maine. Median sales price indicates half the homes sold for more than the $169,750 figure and half sold for less.
Since interest rates continue at the very lowest levels, potential buyers should be encouraged to take advantage of lower monthly mortgage payments on a home purchase. Regarding mortgages, many look at a mortgage as like paying rent. With a fixed rate mortgage, you are paying the same amount each month for thirty years. How often would you be paying the same monthly rent for 30 years?
Owning a home gives a person a feeling of accomplishment and gives the owner a sense of stability. Capital gain is the profit that you make when you sell your house and make a profit. Currently, the first $250,000 capital gains for a single filer and $500,000 for a married couple filing jointly are excluded from taxation on federal tax returns on a primary residence. Real estate has a good record as an investment. A person who placed money in the Dow Jones in 2007 and sold it in January 2009 would have lost 49.3 percent. Even if they sold today, they would still lose about 25 percent.
If an investor bought gold at the end of 1987 and sold it in 2000, they would have lost about 50 percent of their investment. Real estate, may, therefore, prove to have been, and also in the future to be, the best investment for the most persons.
Over the last 10 years, according to the Case Shiller Pricing index, real estate prices have appreciated 40.3 percent since their August 2000 report. During the same ten year period, the Dow Jones average lost 7.04 percent.
Buying a home today may well prove to be a financial decision for years to come. A person should not be discouraged from buying a home because of all the bad news.
Warrant Buffet, the great investor said, “When others are greedy, be fearful. When others are fearful, be greedy.”