“If you don’t own a home, buy one. If you own one home, buy another one. And if you own two homes, buy a third and lend your relatives the money to buy one.”
– John Paulson 9/27/2010
WOW! That’s a powerful statement.
There is no question that John Paulson is a bull when it comes to residential real estate right now. Should we care what Mr. Paulson thinks? Should we listen to him? The answer to both questions is a resounding ‘YES’. Here are several reasons why.
Who is John Paulson?
Paulson is the person who 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 who made a killing going short subprime mortgages a few years ago.
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.
What did other financial players think of his statement?
The Wall Street Journal agrees with Paulson:
Ignore the critics. The odds have to be on his side…It isn’t just that home prices have fallen a long way. It’s also that, if you can get a mortgage, you are basically taking a reverse bet on the bond market. You could be a long-term borrower at fixed rates, instead of a long-term lender. Right now you can borrow for 30 years at around 4.3%. After the mortgage tax deduction, for some people the net effective interest rate is nearer to 3%. That’s going to prove an awesome deal if we see inflation again.
And Forbes said:
As this is the best time in 50 years to buy homes, Paulson advised his listeners to take 30 year mortgages to buy a home as “your debt and interest payments get locked in at record lows, while the price of your home will rise.”
Are others also saying now is the time to buy?
Just last week, we posted that there is a growing number of people saying that NOW is the time to buy, including:
§ The Wall Street Journal
§ Professor Karl Case, founder of the Case Shiller House Pricing Index
§ The wealthiest families in the country and
§ 70% of everyone else in America
Bottom Line
Thinking of buying a home? Are you taking advice from a friend or family member telling you that now is not the time? It may be time to listen to people who better understand the opportunities that exist in real estate today.
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Showing posts with label Real Estate in the Florida Keys. Show all posts
Showing posts with label Real Estate in the Florida Keys. Show all posts
Thursday, October 7, 2010
Tuesday, September 21, 2010
Luxury Home Purchases Soar
Hi again, everyone! Well, the news is out that we are supposedly out of the "Recession"- the worst one since the Great Depression! I don't know about you, but it sure doesn't feel like it- at least not yet. Yesterday I included a blog on the potential flooding of the market with bank owned properties or foreclosures. If you read yesterday's blog you would know that this release of the so-called shadow inventory that we have been worrying about for at least a year has never happended. Today I received this artical regarding the Luxury Homes Sales that I think is pertinent so I thought I would include in today's information.
Luxury Home Purchases Soar:
The real estate market has been going through some challenging times this year. The National Realtors Association’s (NAR) last Existing Homes Sales Report showed that sales were down 25.5% from the same time last year. Media headlines screamed that the housing market was screeching to a halt the following day.
There is a segment of the market that is actually flourishing however: luxury homes.
According to NAR’s 2Q Report on Home Sales Statistics, every price ban under $1 million showed a decrease. Here are the numbers:
§ Homes less than $100,000: sales down 17.1%
§ Homes $100 -$250,000: sales down 35.3%
§ Homes $250 – $500,000: sales down 27.9%
§ Homes $500 – $750,000: sales down 12.8%
§ Homes $750,000 – $1 million: sales down 6.7%
At the same time, the sales of homes over a million dollars are UP 6.1%. Many people were shocked that the upper-end market is beginning to recover. It seems that this trend will continue as we move forward.
Unity Marketing, a market research firm specializing in the luxury consumer, just completed their study, Home Is Where the Style Is, which showed that the luxury home buyer has plans to re-enter the market in a big way. When asked if they plan to purchase a home in the next twelve months:
§ 11% responded that they would build a new primary residence (up from 3% in 2008)
§ 11% responded they would buy a new primary residence (up from 6% in 2008) and
§ 11% responded they would buy a second/vacation home (up from 2% in 2008)
Why this sudden resurgence in upper-end purchases?
We think there are three major reasons:
1. The affluent were less impacted by the economy.
An article in the Wall Street Journal reported the number of millionaires is soaring:
“… the number of American households with investible assets of $1 million or more rose 8% in the 12 months ended in June … There now are 5.55 million U.S. households with investible assets of $1 million or more.”
2. The wealthy understand investment cycles.
There is no doubt that the wealthy will have a better feel as to when the market will return. They are more accustomed to the up/down movements in the cycle of any investment. They are seeing value in today’s real estate and acting on what they perceive as an opportunity.
2. Mortgage rates for luxury properties are at historic lows.
Jumbo interest rates have fallen a full percentage point in the last year (from approximately 6% to 5%). The difference in a $1,000,000 mortgage payment from last year to now is $3,216.40/month. The annual savings of over $38,000 may be too good to pass up.
Bottom Line
With property choice almost unlimited, values at pre-bubble prices and interest rates at historic lows, it might make sense to buy the home or vacation spot your family always dreamed of. It appears the wealthy are doing just that.
Luxury Home Purchases Soar:
The real estate market has been going through some challenging times this year. The National Realtors Association’s (NAR) last Existing Homes Sales Report showed that sales were down 25.5% from the same time last year. Media headlines screamed that the housing market was screeching to a halt the following day.
There is a segment of the market that is actually flourishing however: luxury homes.
According to NAR’s 2Q Report on Home Sales Statistics, every price ban under $1 million showed a decrease. Here are the numbers:
§ Homes less than $100,000: sales down 17.1%
§ Homes $100 -$250,000: sales down 35.3%
§ Homes $250 – $500,000: sales down 27.9%
§ Homes $500 – $750,000: sales down 12.8%
§ Homes $750,000 – $1 million: sales down 6.7%
At the same time, the sales of homes over a million dollars are UP 6.1%. Many people were shocked that the upper-end market is beginning to recover. It seems that this trend will continue as we move forward.
Unity Marketing, a market research firm specializing in the luxury consumer, just completed their study, Home Is Where the Style Is, which showed that the luxury home buyer has plans to re-enter the market in a big way. When asked if they plan to purchase a home in the next twelve months:
§ 11% responded that they would build a new primary residence (up from 3% in 2008)
§ 11% responded they would buy a new primary residence (up from 6% in 2008) and
§ 11% responded they would buy a second/vacation home (up from 2% in 2008)
Why this sudden resurgence in upper-end purchases?
We think there are three major reasons:
1. The affluent were less impacted by the economy.
An article in the Wall Street Journal reported the number of millionaires is soaring:
“… the number of American households with investible assets of $1 million or more rose 8% in the 12 months ended in June … There now are 5.55 million U.S. households with investible assets of $1 million or more.”
2. The wealthy understand investment cycles.
There is no doubt that the wealthy will have a better feel as to when the market will return. They are more accustomed to the up/down movements in the cycle of any investment. They are seeing value in today’s real estate and acting on what they perceive as an opportunity.
2. Mortgage rates for luxury properties are at historic lows.
Jumbo interest rates have fallen a full percentage point in the last year (from approximately 6% to 5%). The difference in a $1,000,000 mortgage payment from last year to now is $3,216.40/month. The annual savings of over $38,000 may be too good to pass up.
Bottom Line
With property choice almost unlimited, values at pre-bubble prices and interest rates at historic lows, it might make sense to buy the home or vacation spot your family always dreamed of. It appears the wealthy are doing just that.
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