May 2009

Renting vs Buying a Home

Deciding whether to rent or to a buy a home can be a challenging decision. Many weigh the aspect of “throwing” equity or potential future value away when renting a home. That said there are many other reasons to rent over buying a home and vice versa. Here are some considerations I would recommend when making this type of decision.

Renting a home

The pros of renting a home:

• As a renter you don’t assume any of the major responsibilities of owning a home. Of course you should keep the home in good order; however, you’re not required to replace the broken water heater or maintenance the AC. Your responsibility is to keep the home in good condition less wear and tear.
• Before our current economy no one thought of the values of homes declining, especially in such rapid form. Since this is now a certain possibility, as a home rentor you will not take this potential risk.
• By renting a home you can stay flexible by signing a leas for 6,9, or 12 months, based on your planned stay. At the end of the term you can always re-sign an extended lease or decide to depart to a new location.
• The monthly cost of renting a home can be substantially lower then owning a home, especially with the many home available at present

The cons of renting a home:

• The tax write-off one receives from owning a home can be significant. This is especially true if you just recently purchased your home as lenders front-load your load with interest. So in the beginning a majority of your monthly payment can be deducted. Additionally, your real estate taxes can be deducted from your taxes as well. This can lead to significant tax savings, in particular if you are in a high tax bracket.
• Your monthly payment is effectively locked for the next 15-30 years when you buy a home. As a renter you are subject to increases in your payment at the discretion of your landlord.
• You lose the opportunity to receive a potential increase in value by owning the home.

Buying a home

The pros of buying a home:

• I believe the single most reason people buy a home is because it’s “The American Dream.” There is a sense of emotional satisfaction when you can stand on a piece of your own real property.
• You can do almost whatever you want to your home. Of course you’ll need to make sure it meets your neighborhoods CC&Rs(codes covenants, and restrictions). I know you didn’t read it, neither do most, but as long as it doesn’t violate that or your city’s/town’s building code, go for it.
• Write it off. You know this is probably the 2nd most common reason for buying a home. You can write off every penny of interest and real estate taxes, which can lead to HUGE tax savings.
• Time has proven that your home will “most likely” gain value. This can lead to significant wealth and security; however, as we’ve recently seen this is not always true.

The cons of buying a home:

• You’re responsible to maintain your home, so when it breaks and you didn’t plan for it, you still have to fix it. Air conditions, water heaters, and many other potential issues can arise on a home and they can be very costly to fix.
• Closing costs are thousands of dollars in most cases, so budget accordingly, usually about 1% off of the home value.
• You’ll be forced to pay private mortgage insurance (PMI) if you don’t put 20% or more down.

I hope these help you with making your decision with whether to buy or rent. If you have questions or need to find a real estate professional in your area, please let me know.

You can reach me at lhasson@realestatearizona.com

Arizona Cardinals Couch

I was looking for some new furniture and found these really cool couches. Most of my friends are sports nuts and I thought these would go great in a bar or entertainment room.

Baseline Arizona Cardinals NFL Pub Sofa

Sports Fan Arizona Wildcats NCAA Teamseats Leather Sofa

Sports Fan Arizona State Sun Devils NCAA Teamseats Leather Sofa

The Gaslamp District Says It All

I was finally able to get out of dodge and head over to San Diego to enjoy the amazing weather and activities. Last night I went out with my lady friend and enjoyed an amazing meal at one of the coolest restaurants ever, the Gaslamp Strip Club. We grilled our own steaks and sipped on delicious martini’s, I highly recommend checking it out if you have a chance. Luckily we were able to grab an outside table and indulge on the amazing atmosphere that the Gaslamp District has to offer.

To my surprise the streets seemed duller then usual and didn’t contain the hoard of people that normally would be walking the streets. After dinner we walked down 5th Avenue, the main Gaslamp District street, I saw another unusual aspect of this area. The buildings seemed to have availability, both commercial and residential real estate. This is only an observation and I don’t have any quantitative information to back this up, but it seemed odd to me that one of the coolest and most activity rich areas had so much availability.

Who knows, maybe there’s nothing going on here, but when I see a lustrous place with vacany it obviously reiterates our current economic state. That said, it may also stand as a possible opportunity to get in on what very well could be a real estate bottom (That’s me trying to look at the glass half full).

Anyway, I hope you are all having a great and safe Memorial weekend as I know I am

50% Increase in Arizona home sales!

According to the National Association of Realtors Arizona experienced a huge increase in home sales, some 50% from the same time last year. This is great news for many Arizona home owners; however, this increase has come at the expense in home prices, which are down significantly from their overall highs. Just a year ago homes in the Phoenix area had a median price of $222,200, that’s down to $129,200.

What does this drop in home prices mean?

It means a lot for home owners in the valley as homes are now priced at levels that people can afford. Home investors are also back on the scene with the many foreclosed homes that can be purchased at ridiculously low prices.

Did we hit a housing bottom?

The short answer is maybe. As the likely result of reduced pricing and inventory will be a stabilization back to normal activity. This is not to say that Arizona home prices are going to rise significantly, but a stop in price decline and a potential marginal increase in home prices may be on the horizon.

Either way, its been an interesting year for the Arizona real estate market and these signs of light are welcomed by almost every Arizona homeowner Good luck!

Arizona Mortgages

Getting a loan for your Arizona home is quite different then it used to be. When I bought my primary residence I did stated-stated. This basically means I provided almost no documentation to back up what I said my holdings and income actually were. As a result of this process many people committed fraud by stating higher incomes making it possible to by homes they truly could not afford.

At present, getting a home loan is a much different process. Borrowers are required to fully document the loan and more scrupulous underwriting practices are now in place. This has made getting a home loan a more difficult procedure, but in the long run is necessary to prevent another “housing bubble.”

So if you’re a Arizona home buyer or looking to refinance your home you should be aware of several items prior to taking it on.

• Figure out what you can afford and consider buying something below what you are able to. Meaning if you can afford a $1500 a month payment, buy something with a $1250 a month payment. That way if you do suffer a job loss or other income issue you’ll be better able to recover.
• Put some money down. Forget 3-5%, you should put at least 10-20% down. If you can’t do this, then you probably shouldn’t be buying a home.

These are just a few items to consider, so be sure to consult an Arizona loan professional to guide you through the process.

Comparable Homes

When looking to buy or sell an Arizona home it is important to have your real estate professional provide comparable home sales, pending sales, and current listings. Buy obtaining this information prior to making a purchase or sales decision you will have past information as a way to indicate the future.

For selling your Arizona home, you will be better equipped to price your home. Of course the quality of agent you deal with will make a difference, but don’t always be angry with your real estate agent, because you don’t like the listing price. This is a tough real estate market and people’s expectations must change. That said, have home sale and listing information will provide the cold hard facts for your home’s value.

For buying an Arizona home, you will be better equipped to negotiate the price of your home. If you’re fortunate enough to be buying now and not 2 years ago, then you should have significant leverage when buying an Arizona property. Use the comparable home information as a way to prove your price. Furthermore, if you are buying a short sale it will be necessary as some banks are being stubborn when approving a sale.

If you find it challenging to interpret the information, be sure to have your real estate agent give you a thou rough explanation. This will insure your decision be backed by the facts and logic rather then emotion.