You’ve been thinking about buying a vacation home in Miami Beach for some time now, but the dismal condition of the real estate market in Miami Dade County has squelched your enthusiasm. This summer’s subprime mortgage collapse, and the barrage of media negativity that’s followed, have acted like a cold downpour on your vacation home fantasies of Florida sunshine and sandcastles. Still things are barely as bad as they seem, and vacation home shoppers should take a positive “glass half full” approach to today’s Buyers market. The fact that home sales have been slow is actually a good thing, because you can now get your vacation home for a lower price. If you can find one you’re thrilled with it’s still an excellent idea to have a quality tenant help offset some of your costs. Besides, a vacation home is not a short term investment like a handyman special “flip”. It’s a purchase that’s meant to pay long term dividends of great fun and great memories for you and your family so don’t let the economic factors beyond your control scare you away from your Miami dreams.
Patience is always a virtue. Because a vacation home purchase is always a long term investment, your focus shouldn’t be on what the Miami real estate market is doing right now. Your concern will be on what the price of your home will be down the line, years from now. Patient money is needed. If you buy smart, it’s very likely to build up a good amount of equity in just a few years. As your equity builds and rental fees increase over the years, you can rent it less often and still stay ahead financially. Know that your oceanfront condominium in Miami Beach FL will eventually become profitable. In the meantime, you’ll have an excellent place to spend your future vacations with no reservations required!
Today mortgage rates are down to their lowest levels in nearly 4 years! Freddie Mac reported a rate on the 30 year fixed rate averaging 5.48 percent down from 5.69 percent last week. Last year, the 30 year fixed rate averaged 6.25 percent. The 15 year fixed rate loan averaged 4.95 percent down from 5.21 percent last week. 1 year ago the 15 year fixed rate averaged 5.98 percent.
“Economic news released last week confirmed the weak condition of the housing market,” Freddie Mac vice president and chief economist Frank Nothaft said in a statement. “When the Federal Reserve cut the target federal funds rate by three quarters of a percentage point, the action was extraordinary in both the magnitude and the timing of the rate cut,” he said. CNN.com
On a 1 million USD vacation home with 20% down, your monthly payments on a 30 year fixed rate mortgage would equate to $4,532 per month (Principal & Interest). On a $500,000 purchase (20% down) and a 30 year fixed rate loan, your monthly principal and interest payments come to $2,266. On a 15 year fixed rate purchase of $1 million (20% down) your payment will be $6,318 monthly and a $500,000 vacation home on the ocean will be $3,159 monthly (Principal & Interest). Key points you should consider. 1. Home equity still accounts for the largest single source of household wealth, both for the individual homeowner and for homeowners as a group, despite the increase in the percent of households holding stock in recent years. 2. Housing has historically provided both a reliable and a profitable return to homeowners. 3. Most homebuyers use a mortgage combined with a down payment of 20 percent or less to finance their purchase. It’s this leveraging of borrowed funds that gives housing a return far in excess of the stock market’s appreciation. 4. The financial return on housing also includes unique tax benefits, which apply only to housing.
In the latest housing outlook from NAR, analysts predict that the housing downturn may have hit bottom and is starting to turn around. Existing home sales should hold fairly steady over the next few months, then rise later in the year and continue to improve in 2009, according to NAR. You’re invited to leave any thoughts, opinions and comment below.