By Bruce Cathcart
One of the smartest things I ever did was to buy a home. The original title of this article was “THE Smartest Thing That I Ever Did” but my wife/proof reader made it painfully obvious to me that buying our home was not THE smartest decision I ever made, just one of them! Next week I celebrate my 60th birthday and my wife who is just a single shade of grey more than I will officially retire next June after having been a school teacher for forty years. While doing some financial planning this past week for our future we had a chance to look back at the financial decisions that we had made in the past. Clearly buying our home was the best investment that we have ever made.
I have seen a couple of commercials on TV lately featuring Jeff Goldblum talking smack about home ownership and how great renting is. It is understandable why he says this as he is paid to do so by his sponsor Apartments.com, but I’m pretty sure Jeff owns his own home and would not take his own advice on this! I also know that a lot of folks lost their homes in the “Great Recession” due to bad lenders, bad timing and most likely bad advice. In addition, so many young people are still struggling with a large student loan debt, a lousy job market and low wages making it extremely challenging for them to buy their first home. But I urge all of you not to give up on the dream of home ownership! It can provide you with stability and financial security throughout your entire life. Let’s take a look at the sales data for last month and then I’ll share more about how owning my own home has helped me in my life and how owning your own home could benefit you too!
According to the Desert Area MLS (as of 08/01/16) there were 822 pendings of residential properties here in the Coachella Valley in July. That’s down from the 915 pendings in the previous month (June) but still showing good volume and representing a significant increase in pendings when compared to the same time last year. In June there were 911 solds and in July we had 728 solds showing the normal “seasonal” decrease in closed sales. This is another increase over last year though when we sold only 691 homes in July 2015. In summary, we have now surpassed last year’s total sales through July and our monthly closings remain over 5% above last year’s closings. Our inventory of homes for sale was significantly reduced by almost 14% this month with only 3,867 homes available on July 31, 2016 compared to 4,450 homes available on July 1, 2016. That’s about a combined 34% reduction in inventory over the last three months and while somewhat typical for this time of year it continues the trend from a buyer’s market back to a Seller’s market. We have yet to see prices increase due to a shortage of houses on the market but the current data suggests that the combined historically low interest rates with the present low inventory will eventually push prices up. I said it last month and I will say it again, if you can stand the heat, now is a good time to be shopping for a home here in the Coachella Valley.
My wife and I are typical of most folks in that over the course of our lifetimes we have been horrible savers. We really only need a checking account since our “savings” account is liquidated regularly for Christmas, family vacations or some major purchase. If not for owning our home we would likely not be where we are at today financially. We purchased our home in 1982 with a first mortgage at 16% and a second at 10% and we struggled to make our mortgage payments. Eventually interest rates fell and we refinanced to a lower, fixed rate of interest and added a couple of bedrooms for the couple of children that we had added to our family. Eventually we no longer struggled to make our house payments but needed some help paying for college tuition, so we refinanced again this time with a 15 year mortgage at an even lower rate of interest. The end result of that was two graduates with no student debt and a still manageable monthly mortgage payment. Today we have about 7 years left until our mortgage is paid off, unless if we choose to make additional payments. Looking back financially at our years of home ownership it is clear that our home served as our savings account for the future. Unlike rent, our monthly mortgage payments reduced the amount of our loan thus building equity in our home. When combined with rising home prices, this allowed us to borrow against that equity to afford upgrades to our home and college tuition while at the same time keeping us in control of our monthly housing expenses. Looking ahead to our future, thanks to our home, we have a fixed monthly housing expense that we can afford (even on social security when we get there!) but if necessary, we also have a safety net in our home’s equity that we can use by refinancing our mortgage or even selling our home to cover any unforeseeable catastrophic need. Looking back with my 20/20 hindsight it is clear to see that for peace of mind and financial security buying a home was one of the smartest things I ever did.
Join me each month this year as we keep a close eye on our Coachella Valley real estate market. If you have a real estate question or concerns please email me at the address below.
Bruce Cathcart is the Broker/Co-Owner of La Quinta Palms Realty, “Your Friendly Professionals” and can be reached by email at firstname.lastname@example.org or visit his website at www.laquintapalmsrealty.com.