Another concern that many buyers have is “timing the market” this means when to buy. What happens if homes go down some more? What happens if after I buy homes drop in price?
Note: What is discussed in this article will not apply in the same manner to what are called “High Cost Areas” in the USA. These are, in the main, densely populated areas such as: Los Angeles, New York, Miami, Chicago, Seattle, San Francisco, etc… where even at the time of this writing, real estate prices are still so high that renting makes more sense than owning. However, there are hundreds of major cities in the USA where this is not the case, the example used here is Jacksonville, Florida, but there are many more.
At the time of writing this article, to build a middle of the road home costs about $75 per square foot, not counting the land. A 1,600 square feet home would therefore cost around $120,000 to build plus the land. This means that at today’s prices, a new home should cost around $170,000 (considering $50,000 for the land).
A luxury home would be much more since they can cost upwards of $300 per square foot and usually the land they sit on is even costlier than the actual home.
In other words, no builder can make any money at these depressed prices, therefore once the cheap existing homes are sold and because of population growth, prices MUST increase. When this will happen is of course a matter of speculation.
The reason why a further small drop in real estate prices is of no great concern to buyers in Jacksonville, has to do with financing, see below:
In the above table you can see what payments look like, using an FHA loan, for a price range from $60,000 to $100,000.
If you buy a $60,000 home using an FHA Loan, your payment would be about $453/month approximately –all included. If you buy a $100,000 home with the same type of loan, your payment would approximately be $722/month –all included.
Chances are you are already paying MORE IN RENT!
This graph below shows how much people are paying in rent in the area of Jacksonville Heights – Oak Hill (Zip 32244):
Some buyers worry that they may get fired or that their job situation is unstable and that is why they don’t want to buy, but they are paying more in rent!
They will pay rent one way or the other, NO MATTER WHAT HAPPENS TO THEIR JOB SITUATION, but when paying rent NOTHING GOES TO YOU!
Regardless of your financial condition you DO need a roof over your head.
Since you have to pay the rent, no matter what, wouldn’t you rather pay less & make this financial sacrifice for something that belongs to you?
Moreover, if you look at the above figures you may realize that you are paying MORE IN RENT than what a $100,000 WOULD COST YOU!
This will not work in places like California, people in Jacksonville are extremely fortunate.
This makes sense only in areas such as Jacksonville, around in California, in the High Cost Areas, homes prices are so high, even in this depression, that people have no other option but to rent.
The Opportunity of a Lifetime:
According to Harry S Dent, renowned Economist, recessions of this magnitude are about 80 years apart, it is very unlikely than any of us reading this information will ever see these times coming back again, it is literally the opportunity of a lifetime.
Many of us don’t see it that way because we are in the middle of it but I assure you that to people in the 1930s they too could not see the opportunities around them.
If you are looking for a deal, in Jacksonville you are already surrounded by them!
Does it matter if homes drop a little more? Whether you buy a home for $94,500 or $91,500 your payment, down payment, insurance, interest, etc… would nearly BE THE SAME!
Can you afford to buy a $60,000? Those who can afford a $60,000 may also afford a $100,000! Why then settle for less?
In Jacksonville Heights prices are so low that you can have your pick.
Before we leave this topic, there is one last important concept you need to know to get the best possible deal on a piece of real estate, follow this link for Price, Value & Affordability -what you need to know.