Is Now the Time to Buy Real Estate?

Many of you are following my saga of buying a new home. You read along as Linda and I looked at house after house. We’d find one only to get outbid by other buyers. Finally after several months, we found ourselves in the catbird seat on our dream home (after yet another bidding war).The roller coaster continued. Squeezing a mortgage from a bank was like getting blood from a stone. Despite stellar credit and a sizeable down payment, finding a willing lender proved difficult.Isn’t it a crime that these banks are getting billions in taxpayer dollars and are unwilling to lend?A top notch mortgage broker proved invaluable in securing our financing. After purchasing the property, renovations began.Renovations brought another set of problems and experiences. Plumbing installed wrong; Painters not paying attention to the job at hand; A small fire (which was quickly put out); Problems with noxious chemicals for the floors; And a water heater leaking two days after starting repairs.We were pleasantly surprised by a few things…
For example, the extra insulation the house contained (which is key during a hot summer). And the surprise visit of our local bull snake (we named him Oliver). He slithered through an open door and right into the living room.Our neighbors are friendly but mostly keep to themselves… and the horses love their new barn and turnout.Despite all the difficulty and problems, we couldn’t be happier in our new home.This leads to a big question… Is now the time to buy real estate as an investment?Buying a house to live in is one thing… buying for investment is another.We all know the background of the housing industry.The housing industry across the country has been decimated. A few years ago, the Federal Reserve started raising interest rates. Mortgage rates moved higher and sub-prime borrowers with adjustable rate mortgages found themselves in hot water.The increase in payment was too much to handle.With mortgage delinquencies moving higher, banks started tightening lending standards. Loans became harder to get. The pool of eligible buyers shrank dramatically.Fewer buyers and tightening credit crushed demand and home prices started falling.The vicious cycle accelerated. With fewer and fewer buyers, home prices had to fall. Add to the cycle a weakening global economy and a falling stock market, and we’ve got a real ugly mess.So, is now the time to buy?Let’s look at some recent data. Home prices moved up last month, according to the Case-Shiller Housing Index, which tracks home prices in 20 key cities (including Phoenix). For the first time in three years, home prices actually increased.According to the data, 13 of the cities recorded higher prices, and two (Charlotte and San Diego were flat). Could the housing downturn be over?
Let’s look at some other data…New housing starts are up for the month of June.Home builder sentiment is up (confidence is returning).Mortgage rates are near 50 year lows.The Federal Government’s giving first time homebuyers an $8,000 tax credit.Individually, these are all great signs of life in the homebuilding industry. Taken together, it’s a clear sign the industry’s on the upswing.In my mind, it means now’s the time to be buying. If you have a long term outlook, the cash and/or the ability to borrow… consider picking up a few rental houses. With today’s depressed prices, everything you buy should be cash flow positive.Trust me. In five years, you’ll look back and kick yourself for not buying more.

Buying Real Estate In San Diego

In picking a new place to relocate you home or your business, it is important to do an environmental scan of the place where you intend to transfer. Having the right information with regard to living in a particular area can help you decide whether to push through with the transfer.There are various sources of information on specific areas across the United States. A simple search on the Internet can lead you to various links to information on specific places. One of the more famous destinations for relocation is San Diego California because of its healthy business climate. Below are a few facts about San Diego that can help you decide whether to relocate there.Cost of LivingWith regards to housing in San Diego, the prices for housing include the principle and interest on the cost of the home, the taxes involved in purchasing and maintaining a house, insurance, homeowner fees and maintenance fees. The prices of homes depend on the location of the property, in more expensive areas such as La Jolla or Del Mar, the prices are higher than average. The tax that you have to pay in purchasing a house is usually 1.2 percent of the value of your house per month plus other taxes real estate taxes such as the Mello-Roos tax.There are a number of insurance companies in San Diego that provide fire insurance and other types of insurance on your home. The homeowner fees depend on the location of your home. The usual price of these fees range from 50 dollars for neighborhoods that share landscaping to 150 dollars for gated areas with private streets and community pools. Homeowners who live by the sea face the challenge that the salt in the air poses to homes, which is why they incur higher than usual maintenance costs.San Diego’s wide-open spaces and recreational facilities help lure many people to relocate there. However, if you are thinking of doing so, you must first consider all the costs that you will incur, specifically the cost of buying and maintaining a home in San Diego.

Buying Real Estate and Moving to Costa Rica – Considerations

Strategy for Buying Real Estate in Costa RicaWhen we’d settled on Costa Rica the destination we planned to retire to the first thing we did was set a strategy to find a piece of property that met our requirements in terms of size, location and budget. We were pretty savvy shoppers having bought and sold close to a dozen properties in the states so we thought we knew what we were doing. We first looked for foreclosed property in Costa Rica. We quickly realized there wasn’t much in the way of foreclosed homes in Costa Rica since most homes have no mortgage, with most being purchased in the past for cash. The mortgage market in Costa Rica is still in it’s infancy. Typically you can’t get a mortgage on land, only developer financing. In this type of financing, the developer holds the note. Mortgages for finished homes or construction mortgages typically require large down payments in Costa Rica. Banks in Costa Rica want a minimum of 20% of the value of the mortgage as collateral. Fortunately you can typically pledge land you own as collateral for a construction loan which is what many owners in our developments end up doing.Finding a realtorYou do not need to be licensed to sell real estate in Costa Rica. As a result, nearly everyone will pretend to be a realtor if they think they can participate in a sale and make a commission. There is also no national MLS system in Costa Rica. Listing and commission agreements are not standardized. Realtors are not acting as a “buyers” agent or a “sellers” agent. Most are simply hoping to make a commission. Without a standard system of commissions and referral fees, realtors are reluctant to share their listings with other realtors. That means that most realtors will only show you their own listings in Costa RicaFinding a ProjectMany real estate developers in Costa Rica are very new to the industry. What they soon learn is that development in Costa Rica is highly regulated. Getting permits to subdivide, build roads, install water lines or electric is a challenge. Costa Rica boasts staunch conservation. In recent years the government has created new hurdles to slow the growth by foreign development companies with projects aimed at North Americans and Europeans. Verify the experience of any developer you are considering. See what they have accomplished, not what they say they plan on doing. Visit their projects. Ask about fees, CC&As, and deed restrictions. Some developers require you build in a certain amount of time. Others require that you use their construction services even though they may have little or no experience. Also find out the type of development and titling they are doing. Are they selling agricultural parcels with limited use and value? Are they selling “Parcel Minima” parcels with very limited infrastructure and few requirements for the developer to bring electric, water or roads to the lots. Is the project gated? Gated projects often allow a developer to provide little in the way of infrastructure and services inside the gate. There are no municipal standards applied once inside the gate. Find out what services will be provided and when, before purchasing. Buy what you see, not what they tell you is coming. Be wary of brochures full of artist’s renditions of what a development is going to look like. Paragon Properties is a prime example.Determining Value – AppraisalsIn the US, we are used to having an appraisal done on property as part of the purchase process. Appraisals are rare in Costa Rica since mortgages on properties are less frequent but are becoming more common. Most appraisals are ordered by the bank holding the mortgage. Don’t expect to have an appraisal done or even find an appraiser in Costa Rica. Be your own judge. Educate yourself. Kristina and I took a complete set of courses offered by the Appraisal Institute costing thousands of dollars to learn how to do appraisals. Kristina worked for an appraiser to gain additional experience. Appraisals have three parts; comps which are comparisons to similar property in the vicinity with similar characteristics, income approach which is looking at the income that a property would provide from rentals or lease agreements and cost of construction which looks at the cost of the raw land and any improvement on it based on current construction costs. All appraisals in the states consist of all three methods unless specifically stated to the contrary.Property Values Past and PresentA few years back nearly every project in Costa Rica was selling like hot cakes. Prices were spiraling up with no end in sight. In the central valley in places like Escazu and Santa Ana, condo prices were approaching $1200 per square meter and some were topping $2000. Builders of quality single family homes were in short supply and the waiting list for construction was growing. Most major hotel chains and a slew of developers pounced on Costa Rica to build condos knowing that 78 million baby boomers were already looking at options. Guanacaste and especially the area around the Liberia International Airport in Costa Rica boomed with high rise and low rise development. Areas like Jaco, once considered a lowly surfing town, sprouted up high rise projects overnight. Nine condo projects were started in Jaco at the same time by builders like Sonesta and Daystar. The “crane” become a common sight, and I am not talking about the bird. Even as far south as Manuel Antonio, high rise projects were breaking ground.The Shake OutThen came the slow down as the world economy contracted. Some projects have been abandoned while others have slowed way down. Prices have fallen in these types of projects and also in large developments of single family homes that were built out of speculation. Many of these builders must continue to sell some inventory to stave off bankruptcy. Banks once flush with money were now pulling back load commitments.Many buyers were stuck with a project that was partially completed. Some developers went bankrupt leaving the owners fully responsible to compete infrastructure. The market lost value in many areas, especially those in Guanacaste and the central Pacific area around Jaco. The southern Pacific area faired the best. The three story height restriction (from Dominical south to Panama) has kept developers of high rise projects away. The limited accessibility kept large projects out of the region and inventory of finished homes remained low. Prices have fallen a bit on raw land without ocean views but ocean view parcels have continued to creep up in price.Southern OptionsThere is a two tiered pricing system in Costa Rica, that of Tico style homes and North American style homes in expat communities. Most North Americans don’t do well in Tico style homes or in a Tico neighborhood though some old hippies and such may do so. Housing aimed at Expats offers a variety of choices. High rise buildings with secure parking, upscale residential neighborhoods, large communities like Los Suenos golf residences (expensive) or small projects like the ones dotting the coast from Jaco to Quepos. Further south, these types of developments are harder to find.