The stock market is looking more volatile by the day and a recession may be on the horizon; so, is a buying second home a smart move?
More people are considering selling their assets in order to purchase real estate after the successful years of 2020 and 2021. Real estate, after all, is a tangible asset with practical uses and a track record of maintaining value. Stocks are merely digital values that could experience an overnight decline in value.
If you’re worried about a housing bubble bursting like it did in 2008, most experts don’t think that will happen. Here’s what Diana Olick, a leading Real Estate expert outlined as the differences:
- The housing market has cooled off a bit after an incredibly hot stretch fueled by the pandemic. That doesn’t mean it’s about to be 2007 all over again.
- America’s housing market is in far better health today. That’s thanks, in part, to new lending regulations that resulted from that meltdown.
- There aren’t as many risky loans or mortgage delinquencies (because of new lending regulations that resulted from that meltdown of 2007), although high home prices are forcing many people out of the market
Professionals in the real estate industry use a number of terms when they talk about what’s happening with home prices. And some of those words sound a bit similar but mean very different things. To help clarify what’s happening with home prices and where experts say they’re going, here’s a look at a few terms you may hear:
- Appreciation is when home prices increase.
- Depreciation is when home prices decrease.
- Deceleration is when home prices continue to appreciate, but at a slower pace.
Experts forecast price deceleration, not depreciation. That means home prices will continue to rise, just at a slower pace.
Seeing your stocks go down by 30% is a wake up call for all stock investors. At some point in time, you should use some of your stock gains to pay for a better life. Otherwise, what’s the point of investing? Which is why cashing out of stocks to buy real estate is gaining steam.
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If you’re worried about interest rates, it’d be prudent to remember that the average 30-year rate since 1971 was 7.7%, today’s interest rates are below that.
Whether you’re thinking of it as a family gathering place or a long-term investment, there are some key questions you need to consider:
- Are you’re planning to rent out the home at some point or keep it solely for personal use?
- How will you finance the purchase?
- What are the ongoing expenses?
- How much rental income can you expect?
- How will you manage the property?
- What tax breaks might you get?
Be sure to discuss all of the aforementioned options with your financial advisor important family members and a trusted real estate agent. You can make sure that you'll continue to see a second house as an advantage and not a financial burden by doing your research before making a purchase.
The cost of homes is rising and interest rates have increased, driving up the monthly cost of owning. Unsurprisingly, a lot of potential buyers ask if it would still be worthwhile to purchase an additional property in 2022.
Yes, is the short answer. Even in the current market, purchasing a home is still worthwhile if you are financially prepared.
Bottom Line: Stocks are volatile and real estate is more stable and is still an appreciating asset with strong income generation potential if so desired.
Karl Hess provides expert real estate services to residential buyers and sellers in Ocean County. Contact us today for more information on Ocean County Real Estate and for professional assistance navigating this complex home market.
https://www.cnbc.com/2022/06/20/heres-why-this-housing-downturn-is-nothing-like-the-last-one.html
https://www.financialsamurai.com/cashing-out-of-stocks-to-buy-real-estate/
https://themortgagereports.com/61853/30-year-mortgage-rates-chart#current
https://www.ml.com/articles/second-home-investment.html