Raleigh-Cary-Chapel Hil Housing Market Update March 2009

Spring is around the corner...
Time to think about where to invest your $ after filing your tax returns and hopefully with some tax refund checks coming..............

Local Market Update
Triangle home sales hit 10 year low in January , only 729 homes sold in Wake, Durham, Orange and Johnston counties and the average home price sold in the 4 counties was $205K, down 3.7%.In some areas in the Triangle market, home prices already dropped to 4 years ago or even lower.

However home prices are still holding up OK for some highly sought subdivisions. Our local housing market here is different from those in Florida, CA, Nevada and NY where there were lots of "flippers" artifically inflating the house prices in the last few years. For the Triangle area market, it had been stable growth like 4% to 8 % a year before the current financial crisis started to adversely affect our local market. Hence our local market has not been battered as bad as the other markets.

Competitions expected for those "Good bargains"
Most buyers got really good deals in 2008 but we expect more competitions in 2009. We already knew a lot of out-of state and international investors had come into our local market looking for the same good deals. They are competiting with our local buyers and investors. Federal Tax Credit for the qualified First Time Home Buyers. Currently, most of the buyers in our market are those first time home buyers and investors. Many of the first time buyers decide to enter the market now for the following reasons.

(1)Federal Tax Credit,
(2)Low interest rate,
(3)Rent Vs Own,
(4)Lots of inventories
(1) Ferderal Tax Credit
If you to close on your new home between Jan 1 2009 and Nov 30 2009, you may be eligible for up to $8000 Federal tax credits as long as you do not sell your home in 3 years. The tax credit will reduce your tax bill or increase your refund. You can apply this credit to either your 2008 or 2009 tax return. You are eligible if you and your wife earn $150K or less. Please consult with your tax accountant for advices and details.

(2)Low interest rate
Rates on the 30-year fixed-rate mortgage is at a record low not seen for a long time but of course, you will need good credit to qualify for the loan as the lenders have tightened up the qualification criteria.

(3)Rent Vs Own
The cost of owning a home versus renting is in at all times low, favoring home ownership, plus the low interest rate making monthly P&I even more affordable than before.

(4)Lots of inventory -- plenty of choices
There was a 9.6-month supply of unsold existing homes in January according to NAR. For new homes, the inventory hit a 13.3-month supply at the end of January. We also have some foreclosures and auction homes competiting for the same buyers.

Where to Invest??Stock? Real Estate? Cash?
Some people said cash is the safest place now.. Why? First of all, inflation is no where in sight and will probably be put in check by the Federal Reserve in the near term. Cash is definitely better than investing in the mutual funds and stocks market right now for those who have low risks tolerance level. Cash also gives you the power in negotiations in the current real estate market.

Investing in the real estate market is probably relatively safer than other investments right now. There are some good deals out there. As more people get disqualified for a mortage, there will be more people renting instead of buying their first "dream home". The rents are holding up OK in the Triangle residential market. (Commercial rental is in a total different situation. The renters have the upper hand. there.)

More importantly, real estate investing is less volatile than the stocks market. You can also minimize the risks in real estate investing by doing due diligence and smart investing strategy. At least you can feel like you are in more control of you own destiny than the stocks market which is out of the control by any individual investor.

The Fundamentals that made the Triangle so attractive in the past are still here.
--The local governments and Chambers of Commerce are still very pro business and continue to recruit new companies to come.
--This area is still sought after for companies planning to relocate. Good schools and good qualities of life had attracted lots of national or international transplants to raise their families here.
--These will probably be the same reasons for others to come in the future. Forbe Magazine just recently ranked Raleigh as the second best city for "where $500K can still live comfortably lifestyle."
--North Carolina is one of the most affordable states, and Raleigh and Cary have been ranked among the best cities to live for the past 10 years.

If you have any question relating to how to invest in local real estate market and please feel free to email or call me.

Hannah Chan