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Time to Stock Up?
QUESTION: Given the real estate downturn, isn’t this the time to invest in stocks?
ANSWER: The Wall Street Journal reports that “since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5 percent a year thanks to the twin bear markets this decade.” (See: Investors hope the ’10s beat the ’00s, Dec. 20, 2009)
Meanwhile, the National Association of Realtors says that the median price for an existing home went from $138,000 in 1999 to $173,100 in October 2009.
The October NAR figure is up for the decade – but down 7.1 percent from a year earlier.
No one knows how the future will turn out, so there’s no way to say that one type of investing will do better than another.
Equally important, no one invests in all real estate; we invest in a particular property in a specific local market – and the financial future of that property may differ from national trends or from properties less well managed or maintained.
My preference, for what it’s worth, is well-chosen real estate in the path of future growth under the general theory that the population is expanding, most people like to live indoors and additions to the housing stock seem unlikely to keep up with demand in many local markets.
QUESTION: How much have conventional loan limits increased in 2010?
ANSWER: Not at all. The loan limits established in 2009 will carry over. Traditionally, loan limits are supposed to rise and fall as home values increase or decline. However, in late 2008 the rulebook was tossed out in an effort to make financing easily available, especially in “high-cost” areas. While higher limits increase real estate transaction numbers, they also represent more risk to lenders and mortgage insurers because real estate values have been falling. The result is that big loans are available but lenders have toughened standards. For details, speak with local real estate brokers.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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