Kevin's Corner

Have Home Prices Peaked?

Have we reached the end of the real estate boom? If you believe what you see in the papers and on TV you would have to think so. Article after article point to the leveling of home prices and the time to sell a home has increased from 30 days to 90 days or more! I guess the double-digit home appreciation we have all experienced over the last five years has found an end. We knew it would happen, we just didn’t know when.

So, what does that mean to the regular guy? Well, mostly nothing. If were trying to time the market to sell at the very peak, you’ve missed your mark. Over shot it. But for most people that intend to live in their homes for as long as they can, a slow down in housing prices means very little. Or does it?

For older homeowners, it could mean that their options are becoming limited. Selling and down sizing or selling and renting may now not be as easy as once thought. There is no question that many older Americans are going to have to rely on their accumulated home equity to help finance their long-term care some time in their lifetime. So accessing this accumulated equity through the sale of the property has definitely become more difficult.

What was referred to as liquidity in the marketplace has changed and has been replaced with illiquidity in the marketplace.  Not a comfortable feeling.

Another good question is what is my home worth? For the last five years, values climbed every month so home values were pretty much guaranteed to be higher than the last sale. But in this market you can’t count on that, in fact, values could even be less than what was sold last month. In this environment, how do you have any idea what you could get for your home if you tried to sell it today? Also, not a comfortable feeling.

How about interest rates? Do you think they are going down anytime soon? It is a pretty know fact that rising interest rates have a huge impact on prices and selling times of real estate. In my February 22, 2006 Kevin’s Korner, I predicated higher long-term interest rates and in turn higher mortgage rates. You could see that coming. The Greenspan era doubled short-term rates, naturally long-term rates would increase.

What is my recommendation? If you are over 62, own your home and do not too much debt on your property, it is a fantastic time to look at a reverse mortgage. Even though home prices have stalled, home values are still very high. So before home prices correct downward, the timing is very good for a reverse mortgage. Also, interest rates still seem poised to increase. Higher rates hurt home values and reduce how much equity can be released in a reverse mortgage. Clients who followed my recommendation in January and February certainly did better than if they waited. Don’t be part of the crowd in November that wished they had done something in June.

Let’s face it, home equity is just as important a retirement asset as a 401K, savings and investments. There were a lot of investors that should of sold their stocks in 1999 but they held on hoping somehow the market would turnaround. Their investments evaporated in front of their own eyes. I know that many people are looking for answers not a sales pitch. Don’t let your home equity evaporate before you get to it. Don’t let 2006 be the year you should of done your reverse mortgage! Give me a call – 1-886-552-7853

Senior Security Capital