Is Real Estate Still The Road To Riches?

With home sales slowing down and condo pricesThe 1st time buyer will normally start with a one or
slipping sellers all across the country seem unable tosmall two bedroom house or condo with the hope that
get their asking price.price rises will allow then to "Move Up" to a bigger 3
Christopher Mayer, a Columbia University economicsbedroom home in a better area within a short period
professor said recently "If you're expecting aof time, say one to two years. Slower price rises or
short-term gain, you should be looking elsewhere," hehigher interest rates will put the loan repayments on a
had argued for many years that land shortages andnew larger home out of the reach of the buyer and
rising populations would translate into ever-rising pricesthis leads to the whole market getting weaker.
in the "superstar" cities like New York and SanThe Europeans have an interesting system in place,
Francisco and LA.credit scores have no bearing on the way they
With many of the real estate bulls now waving thecalculate your ability to repay the loan. Under the
caution flag we have clearly reached the time for abanking and home loan laws you most provide proof
re-think on this subject. Before we start going downof income, once this is done they will offer you the
the "Doom and Gloom" road it should be understoodchance to finance up to 4 times your income. Most
that owning your own home is still the corner stone ofprograms will finance up to 90% of the loan to value
the "American Dream" and it will always be that way.of the property this system seems to ensure a steady
What does it take to fuel that dream, home prices aresupply of 1st time buyers along with regular increases
normally driven by 3 things. The first is low interestin house prices with affordable loans.
rates, the second is the willingness of home buyers toLA and New York are the so called "Super Star"
pay for their idea of the American Dream and lastlymarkets and not really reflective of the whole county,
the ability to attract 1st time buyers to the market.so your strategy will largely depend on where you live.
Let us take a look at Los Angeles as a market placeLocal markets are affected by many forces like jobs,
for home buyers, the average home sells for 10 timesthe new house market and inflation to name but a
the average salary. Whatever way you look at it thisfew. Homeowners who hold on to their homes for a
is unsustainable, no matter how creative the banks andnumber of years and pay down their debt do far
lenders become with their new programs. As itbetter than those who refinance every two years
becomes more difficult for the 1st time buyer to entertaking out the equity they have built up, this really is the
the market it starts to affect "Move Up" market.Number One Cardinal Sin for homeowners.