Monday, June 9, 2008

Falling House Prices are a Good Thing

New home sales rose in April for the first time in six months. But in an article written by St. Louis Post-Dispatch author Jack Naudi this past weekend, the falling house prices could have been a good thing. Naudi believes first-time buyers and anyone trading up can now buy a house for a smaller down payment and lower mortgage than this time last year.

"For every $5,000 you reduce the price of a house, you can cut your down payment by $1,000, and your monthly mortgage by about $25 for a 30-year fixed mortgage at 5.75 percent.

"In eight months, a married couple buying a house will have more money to either save or spend than they will get from President George W. Bush's tax rebate. And the couple will continue to save $300 every year. Now, that's a stimulus package!

"However, what about those who counted on rising house prices for their nest egg?... Most homeowners are counting on their houses to fund their golden years. Even if you believe your house is an investment, you need to understand that it's highly illiquid. And if your house is your primary investment, you're facing huge risk from lack of diversification."

"Most importantly, buy a house sensibly, understanding that its true value is psychological, social and emotional — not financial."

In St. Charles, buyers and investors have many choices when determining their long-term investment strategies. The Grant Hickman Team can help you find a home to grow old in or a kid-friendly neighborhood to start a family. And, we work closely with financial advisers that know our local economy. Call today for a financial referral or let us help you find the best place for you.

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