The S&P/Case-Shiller 20-City Composite Home Price Index is up 12.6% versus a year ago, and 19 of the 20 cities reported monthly gains. . The national median price for existing homes is expected to increase 5% to 6% this year and 4% to 5% in 2015. The National association of realtors projected that annual existing home sales should come in slightly below the almost 5.1 million closings we had in 2013, but then should hit nearly 5.3 million next year. Most observers feel a moderation in price gains is healthy for the housing market.
Here in Nashville, our trend is very similar with a 10.7% increase in the last 12 months. I’m always reminding people that real estate is the best investment I know of that you can actually use. In some cases, It’s just the best investment I know of. In every investment, you have to know when the sell, and it helps to know when and what to buy.The market does go through cycles and if you are forced to sell at the bottom, you might lose money. I advise my clients on good times to sell, and good times to wait.
In the best case example that I know of, a client was able to buy a foreclosure home from the HUD department using the special financing programs that they had at the time with 100% financing and no closing costs. I’ve never had it happen before, or again, but it happened. The house was in a good location with great schools and it was in fair condition, needing mostly paint and cleaning. He paid less that $140,000 for the house 3 years ago, and the appraisal value of the home is now up to $190,000. He’s considering selling the property, and if he gets the appraisal price, after paying all the real estate fees, he will pocket around $38,000.
You would think that looking at these numbers, he’s made a pretty good investment. His house has gone up in value around 35%, but wouldn’t he have made more in the stock market?
No Grasshopper, you see, he only invested a few hundred dollars for an inspection and appraisal. All of the rest was financed at 4%, making his house payment lower than renting an apartment. His return on the small $600 investment he made was an estimated 6300%. Not bad for something he’s been able to use for the last 3 years.
Lets just take a normal home in Franklin that costs $350,000. In order to purchase this home using a conventional mortgage, you will need a 5% down payment plus an closing costs that could be an additional 2 percent. Let’s just say you will need $25,000 to buy the home, probably half that if you use FHA. If the home appreciates 5% per year (back to normal), you will make approximately 70% return on your investment per year. IF you look at it that way, can you really find a better investment?
Search for Nashville Homes for sale here
