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By Israel Moe

A Very Solid Foundation for a Very Real Recovery
In case you haven’t noticed… the housing market is making a recovery. House prices are cheap right now. At an average 30-plus percent below their peak, buying a home is a bargain in just about any area of the country. In fact, in many cities, it’s even more affordable to buy – taxes and all included – than to rent. Better yet, borrowing costs hit an all-time low in February.

You want to consider a real estate purchase this year! Here’s why:

  • Housing starts have risen for three months in a row, with the number of units now exceeding an annual rate of 715,000 units.
  • Building permits usually act as a decent stand-in for future construction. And in March, they beat out expectations to reach 769,000 units, their highest annual rate since September 2008.
  • The National Association of Realtors/Wells Fargo Index of builder confidence has moved upwards in each of the last five months.
  • The Federal Housing Finance Agency reported that property values rose 0.3% month-after-month and 0.4% year-after-year. That’s the first positive reading since 2007.
  • NAR reported its Housing Affordability Index hit a record high.
  • In the first quarter, foreclosure filings in the United States fell to the lowest level since 2007, according to RealtyTrac Inc. And resale of foreclosures by Fannie Mae and Freddie Mac dropped 18%.

Local Real Estate Bargains
I get asked daily where the best bargains in the market are. The answer is different for every person depending on what their individual use, goals and beliefs are. Whether you are looking to buy a property for your family to use or believe now is just a great time to purchase real estate. If you are considering a real estate purchase in 2013 in our local market consider the following

They is no question over the past 6 years we have all learned a lot about how volatile real estate values can be. Personally this was the 1st recession I have had an opportunity to work through. I have been a full time real estate broker since 2000 in the Walker, MN area. I was selling many properties and dealing with real estate values increasing by 10-15% per year from 2000-2006. Then from 2006-2012 we watched as prices went back 30-50% in most cases.

I personally believe the biggest factor in a market like ours is consumer confidence. The desire and ability of our clients was still there but the willingness was not. In heavily driven resort communities like ours, most of the local sales demand comes from 2nd home buyers. Every year buyers watched prices getting cheaper and didn’t want to buy into a falling market. Those same buyers today are seeing prices stabilize and record low interest rates. I personally believe there will be good demand for lakeshore properties in our area this year. We are seeing the supply of available properties more in line with the overall demand and this ultimately will drive up prices again.

Personal use
If you are buying a home for your personal use now is a great time. You can’t go wrong with buying a property you like. Pick a budget you are comfortable with and buy the best property you can for your budget. If you’re able to upgrade into a more expensive property down the road at least you got into the market at todays value and you will hopefully be able to realize some appreciation down the road if you sell again.

Strictly Investment
Right now I am seeing that land prices are being offered at what I believe to be a great value. The benefit of owning land is that your cost of ownership and maintenance is much less than if you had a home. The burden of upkeep and management is extremely minimal. Land is a great thing to own in a booming real estate market. There are many lake lots, and acreages that are currently available for purchase in our area.

The other option people like to consider are rental properties. They offer income generating opportunities in good and bad times. You need to carefully inspect any property you are purchasing so you understand the cost of maintenance and future capital needs. There is a fair amount of management required with rental properties but if you are willing to put in the effort the rewards can be great.

Investing in real estate is not always easy. Even the best investors run into difficulties. Many people have been able to make exceptional returns owning real estate and some have lost it all. Do your homework and understand what you are purchasing. I am a Realtor not an investment advisers. The reality is many people consider real estate an investment so this is a topic that comes up daily. I always tell people purchase what you like. If you like it there is a good chance down the road someone else will too.

Did You Know?
Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take effect. Since this new tax will affect some real estate transactions, it is important for to clearly understand the tax and how it could impact you. This new tax was passed by Congress in 2010 with the intent of generating an estimated $210 billion to help fund President Barack Obama’s health care and Medicare overhaul plans.

Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.