Vincent van Gogh, Dutch painter (March 30, 1853 – July 29, 1890)
http://www.vangoghgallery.com/

Artists take risks. They pursue their vision, often without financial security, facing long odds while stewing in their own self-doubt. When the world tells them “it’s not safe,” they listen to their own voice despite “prevailing wisdom.” They have a vision and they pursue it.

Occasionally, if they’re very lucky, they get to look back on their life and see the path that lead them to create a masterpiece. At the time, the path wasn’t easy, yet in retrospect, it looks very much like the only possible path they could take.

I think in twenty years or even ten years, we’re going to hear the collective sound of people kicking themselves because they did not buy a home this year. As their teenage sons and daughters graduate and enter the future job market and begin searching for their first home, they’ll turn to their parents and say, “Seriously? You’re telling me when I was in middle school, you could get a 30-year fixed for under 5%?”

Too many remain terrified by the last great storm in the housing market. They stand now on the shores of incredible opportunity, but can’t shake the vision of all those values sinking into oblivion.

Think about the future. Who might need a home? Is there an opportunity to “be the bank” when the time comes? The descendants of those savvy collectors who bough a Van Gogh painting for mere dollars in 1885 are surely grateful for their grandparents’ eyes today, aren’t they?

Yes, there is uncertainty, but this is the calmest water you’re ever going to see. Set sail now and buy a home. Those that do will certainly be rewarded. As for the masterpiece? It will be the satisfaction of looking back and realizing they bought at just the right time.

There’s certainly no risk to exploring the opportunity. I’d love the opportunity to sit down with you and plot a possible course to the best investment you could make. Contact me today.

Here are some quick excerpts from the article:

The era of get-rich-quick real estate is dead. The era of increasing long-term wealth in your home is back.

Historical data from the National Association of Realtors (and adjusted for inflation by Businessweek.com) show that in 18 of the 25 largest metro areas in the U.S., the value of homes purchased in 1990 had increased by 2010, often by double digits. And this in a year when real estate prices around the country have softened since their peak in 2006. These houses would have been worth even more a few years ago.

While that’s cold comfort for the many Americans whose homes have lost more than $1.7 trillion in value in 2010, according to a new report by Zillow.com, it underscores the fact that homeowners who buy for the long term have historically seen the value of their investment increase over the years. In inflation-adjusted terms, the median U.S. home sale price in the third quarter remains approximately 9.5 percent higher than in 1990, despite falling 26 percent from peak levels, according to calculations based on NAR data.

Says Greg Hebner, chief operating officer at Sorrento Capital, an Irvine (Calif.) asset management firm: “You should at least be looking at housing now,” especially as interest rates are low and homeowners can deduct mortgage interest from their income taxes. “It’s still a good game” if a buyer understands the risks, has consistent income, and purchases a house he can afford, Hebner says.

When Supply Is Limited

Based on data since 1968, nominal U.S. home prices have risen 5.5 percent annually and outpaced inflation by about 1 percent to 2 percent, says Lawrence Yun, NAR’s chief economist. The main reasons housing has grown faster than inflation, he says, are that more people wanted to buy in places with a finite supply of developable land, which drove up prices, and owners increased the value of their properties through home improvements.

Home prices followed this pattern through most the 1990s but started shooting up in the early 2000s. Between 2000 and 2006, nominal prices rose 89 percent, according to data from Moody’s Economy.com and Fiserv (FISV), a financial service company in Brookfield, Wis.

Economists from NAR, Fiserv, and Moody’s Analytics interviewed for this story expect home prices to continue to grow slightly more than inflation in the long term. Still, buyers are not likely to see prices skyrocket the way they did in the early 2000s, at least in the near future.

Up by Half, or More

In an analysis of the country’s 25 largest metro areas, Businessweek.com found that the Portland (Ore.) area had the largest real price gain since 1990, with the median sale price in this year’s third quarter ($242,100) up about 85 percent over 1990, in inflation-adjusted terms. Home prices in the Denver, Baltimore, and Seattle areas also made gains of more than 50 percent in that period.

As a Mortgage Banker/Broker for Pacific Residential Mortgage in Portland, OR I am happy to see a national news outlet confirming what I have been relaying to my clients. The get rich quick scheme for real estate has been dead for sometime and aruably should never have started.

“This week there is a good chance that the Federal Reserve in the United States will announce that it is going to print some more money. The reason will be that the US economy has yet to find its legs and they feel a need to give some extra artificial support in order to buy time for the private sector to get back on its feet and spending again. That buying of time aspect is essentially all governments can do when they ease fiscal policy to help growth and all central banks can do when they cut interest rates or in this case take the extreme measure of printing money. In technical terms the operation is called quantitative easing and it does not actually involve any extra physical notes being printed. It goes like this.

The US government is running a very large deficit near US$1.3tn. In order to finance it they usually borrow the money from the public. That means that the $1.3tn more the government spends than it receives in tax revenue is voluntarily taken out of circulation by investors in exchange for promises that they will be repaid the money plus interest some years down the track. The net cash effect is zero. Quantitative easing involves the Federal Reserve buying some of the bonds issued to fund the federal deficit. But the money the Fed. uses to buy the bonds does not come from private sector bank accounts. They simply make a note in their accounts that they have an asset in the form of US government bonds while the government marks a liability in its balance sheet. So where does the money printing as it were come in?

Money that was going to flow from the private sector out of the system to the government does not do so. It stays put in other investments like shares and bank accounts. That effectively is the money which is printed – the stuff that does not leave. By staying in bank accounts etc. there is a net addition to funds circulating in the economy caused by the over-spending of the government – wages etc. Extra money sloshing around means extra downward pressure on interest rates which in theory will help the economy. In practice however a key thing happening in the United States which is keeping the economy weak is an unwillingness on the part of banks to lend more money exceeded in many cases it seems by the unwillingness of consumers and businesses to borrow it.

Therefore the low interest rates which will stay around for longer may not have much effect at all. It is not the price of money people are basing their borrowing decisions on at the moment but their confidence – which is lacking. But the extra money sloshing around does not all simply sit in banks. Some goes into other assets like property, shares, and commodities. People are wary of property understandably given what has happened. There are many feeling the sharemarket is looking over-stretched when one considers the immediate prospects for growth look poor.

That leaves other assets as potentially major beneficiaries of the Fed.s money printing exercise. We think these other assets likely to find favour are going to be predominantly found outside the United States. That means extra upward pressure on commodity prices by investors increasingly talking about a long term commodity price cycle in particular. It also means funds flowing into non-US sharemarkets and currencies and particularly those of fast growing developing economies.

This is what worries the likes of China, Brazil, and many other countries who see their currencies as likely to rise against the greenback. This is where the big relevance to us comes in. Extra funds seeking non-USD dollar investments with a potential bias toward commodity-type assets are quite likely to push the NZD above US 80 cents within the next few months. And as we discussed last week there is essentially nothing sensible the Reserve Bank will be able to do about that. And for those exporters who are going to be affected by a stronger NZD it pays to think about it in the following terms. The greenback is weakening because the US economy is struggling under the weight of truly massive bad debts.

Personally I prefer our combination of an overvalued currency and good Kiwi accounts to the appalling mess they are in which seems destined to get phenomenally worse in coming years as the Federal government one day starts to attack a debt situation rapidly becoming unsustainable. “

Consumer Sentiment has been on the rise since last February and it’s something to which home buyers should pay attention. 

The affordability of your next home may hinge on consumer confidence.

As the economy recovers from a near-the-brink recession, many of the elements of a full recovery are in place.  Business investment is returning, household spending is expanding, and financial systems are gaining strength. 

Consumer confidence is at a 2-year high.

What’s missing from the recovery, though, is jobs growth.  Another net 20,000 jobs were lost in January. Data like that hinders economic growth.

That said, twenty-thousand jobs lost is a much better figure than the several hundred thousand that were shed per month throughout early-2009, but it’s still a net negative number.  Not only does household income drop when Americans lose jobs but so does the average American’s confidence in his or her own economic future.

This is one reason why jobs growth is so closely watched by Wall Street — jobs are linked to higher confidence levels which, in turn, is believed to spur consumer spending.

Consumer spending represents 70% of the U.S. economy.

As confidence rises, it could be good news for the economy, but bad news for home buyers. More spending expands the economy and, all things equal, that leads mortgage rates higher. 

Same for home prices. More confidence means more buyers which, in turn, squeezes the supply-and-demand curve in favor of sellers.

Later this morning, the University of Michigan will release its February Consumer Sentiment survey. If the reading is higher-than-expected, prepare for mortgage rates to rise and home affordability to worsen.