Following a conversation with UV Professor Ed Burton on what the raising of the debt ceiling would mean to interest rates and the real estate market, Roy Wheeler Realty Company CEO, Michael Guthrie, who also hosts “Real Estate Matters” every Saturday on WINA Radio, speaks with station host on the matter.
Jay: We’ve been looking at the debt ceiling from different angles and I think one industry we all look to when we try to gage the barometer of the economy is the real estate industry. Is this a relief to your industry?
Michael: This particular act, as far as raising the debt ceiling, it really didn’t do anything other than raise the debt ceiling. No promise for tax revenue, no promise for dealing with the entitlements, we just raised the debt ceiling. Going back to the personal; it’s like all of us. If you have a credit card and you can’t pay it, that baby just keeps on going up because you pay the minimum payment and you’re not even paying the interest on it.
The point being is confidence. You’ve got these companies that have had some success in the last few months and real estate has picked up a little bit in the last 2 or 3 months so you’ve had a little bit of optimism and you have a little bit of the momentum going, and yet you don’t really want to pull the trigger on some new opportunity because you don’t know what’s going to happen in the next 3 or 4 months because you don’t have the confidence. That’s a lot of what prevents people from buying homes.
People may be ok and they may be secure in their jobs and they’re thinking, but what happens “if”…and that’s what hasn’t been answered yet. And so if we can build some trust; if people can see some positive things happening and see they’re really dealing with the issues to start paying down the debt, then you start getting the trust, then you start getting the confidence and people say ok and are ready to step out and do something.
Jay: Do you feel like real estate is the most critical to your industry about this confidence you’ve been talking about..more so than cars, more so than other types of other things because of how large a purchase a home is?
Michael: People know when they buy a car and they drive it off the lot, it’s not worth what they pay for it. But in real estate, you buy something, you hang on to it and ultimately, you have an investment. It appreciates, you pay down on your mortgage, and ultimately you have equity that you sell the house and do something or else or buy another house.
Well right now, a lot of people don’t feel that way. We’ve been hit bad enough that we’re down to 2006 prices, so that anybody who bought a house in 2007-10, there’s a very good chance that they can’t sell their house for what they paid for it.
If you’re a first-time buyer, one of the things I tell folks is find out what that house can rent for and don’t buy the house and have a monthly payment that’s more than what you can rent it for so that if you do get moved in a couple years, and its not the right time to sell you can rent it and have somebody else paying your mortgage until the market improves or you come back to enjoy that house on football and basketball weekends and whenever you want to come back during the summertime.
Visit this link to hear the full interview.
Posted by: Kimberly Ecker