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Though it was a bad time for many reasons, there were still lessons to be learned from the 2007 financial crisis. Today I want to discuss how those lessons apply to the 2018 market, and how we can avoid making the same mistakes that we did 11 years ago.
1. Don’t buy a house you cannot afford. As a real estate professional, I still see a lot of people who aren’t meeting with their lenders to ascertain how much they can afford. Sticking to a reasonable price range per your budget will be easier on you and your finances.
2. Don’t expect your house to appreciate. Back in 2005 and 2006, people thought that if they didn’t buy a house then, they wouldn’t be able to afford one later on. That wasn’t the case, as we learned a few years down the road when the bottom of the market opened up. If you look at the long term, homes will absolutely appreciate. However, it’s never a straight line of appreciation; there will be ups and downs. The real estate cycle usually restarts every seven to eight years, but we’re about 10 years off from the last one, so if we end up seeing price reductions soon, I wouldn’t be surprised.
3. Make sure you have adequate cash reserves. Most financial planners and economists will tell you that you should have six months’ worth of reserves in your savings—if it costs $5,000 a month to live in your home, you should have $30,000 in your savings.
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Sticking to a reasonable price range per your budget will be easier on you and your finances.
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4. Put down a healthy down payment. Many people are doing 100% financing, which was part of the problem we saw back in 2007. Even if you have to sell a few years down the road when you haven’t yet accumulated a lot of equity, a healthy down payment will allow you to sell your home if your life changes to where you need to move.
5. Sell high and buy low. 2018 could be the best time to sell your home if you bought the house with the intention to flip it and make money. Now is a good time to get your home on the market—the market is hot, inventory is low, and we don’t know what will happen tomorrow.
If you have any questions or need the assistance of a professional agent, please feel free to reach out to me. I’d be glad to help you out.
