Answer depends on whether goals are short- or long-termMonday, November 05, 2007 Inman News |
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Up until the recent slowdown, homeowners in many parts of the country saw the value of their homes rise rapidly. Home prices, in many areas, seemed to move in just one direction: up.
A combination of record-low interest rates and rapid price appreciation turned many homeowners into serial refinancers. When interest rates dropped, one mortgage was exchanged for another, sometimes several times within one year. As home values rose, cash-out refinances allowed homeowners to pull equity out of their homes to remodel, send children to college, take vacations and buy new cars. It was good for the economy while wiping out billions of dollars of homeowner equity. Tapping into home equity seemed like a great idea until the housing market softened. Now there are millions of homeowners around the country who can’t sell their home for enough to pay off the loans secured against the property. HOUSE HUNTING TIP: Buying a home is still a good investment if you can afford it, if you are ready to put down roots in a community, and if you want to invest in your personal happiness. Profit potential shouldn’t be your only reason for buying a home, even though in most cases your home will appreciate in value if you maintain it and if you own it long enough. The housing market, like any economic market, is cyclical. There are periods of robust activity followed by periods of sluggishness. Prices can go down as well as up. Now that the market has softened in most areas, it’s time to look at owning your home as a way to gain control over your personal domain — not as a source of quick cash. |
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