I’ll start this commentary by saying the party in real estate is over. It actually ended 6 months ago, but the pain is yet to be felt. It’s my opinion that the rebound will take some time. Here are some things to remember when considering real estate as an asset class in your portfolio. Please note I view my house as an investment and I view that equity is an asset in my overall portfolio.
First, if you have to move and you have a sub 3pct mortgage, look to rent your house rather than sell it.
Second, mortgage rates are stratospheric right now, but prices have yet to fall. History has shown that prices come down, and in markets that were hot it’s going to happen dramatically.
Third, it’s very rare that I would advise people to look at ARM (adjustable rate mortgage) loans. I just remember that being a disaster in the past, so I’m weary about that type of mortgage.
Fourth, your note consists of principal, interest, insurance and taxes. In markets like my hometown of New Orleans, insurance rates are rapidly increasing. This makes the amount of house you can afford in the overall picture less.
Lastly, in times like this look to rent, but if a rare deal becomes available – be ready to pounce.