Tuesday, September 13, 2005

Still Blowin' Bubbles

I thought I'd explain a little more about yesterday's posting. First, let me qualify my statement about it being a great time to buy. Obviously, prices are at an all time high right now. Based on history, prices will continue to increase over time. They may flatten out for awhile, even decrease in the short term, but over the long term, they will contine to appreciate. We've all gotten used to these incredible interest rates we are seeing right now. They won't be around forever. These are historically low rates. If you buy a home right now, you'll lock in the most incredible rates we've seen in decades.

Sometimes clients are confused, because they are hearing it's a great time to buy and at the same time a great time to sell. They wonder how it's possible that it could be a great time to buy and sell at the same time. Honestly, they think real estate agents are blowin' smoke, not bubbles. I think the answer to that depends on your personal situation. Most homeowners have seen unbelievable appreciation in their home's value. So, it would seem that most would see a sizable profit if they sold right now. That's true, but tax matters should be considered before deciding if it makes sense to sell. If it's your principle residence and you've lived there 2 of the last 5 years, you should be able to exclude $250,000 from capital gains, or $500,000 if you're married. Now, if you own a property that you don't live in and you sell if without doing a 1031 tax deffered exchange, you will probably pay capital gains taxes on the gain. Of course, you should always check with your accountant on any tax matter. All this was a really long winded way of explaining why sometimes your agent is telling you it's a great time to sell at the same time he or she is saying it's a great time to buy.

And now, the best reason to buy or sell? Because you have a need to buy or sell. If it makes your family more comfortable, or gets you closer to work so you can spend time with loved ones, or because you've always wanted a big back yard to hang out in with friends. We get so focused on the investment in terms of dollars that we forget about the payoff in terms of our own comfort and happiness.



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