The Patz McMillan Team

Last year will be remembered as an eventful one, with record-breaking real estate activity in some areas and phenomenal rebuilding initiatives in others. Now, a new year is on our doorstep and it is time to look ahead with measured optimism. Many forecasters continue to predict overall economic growth and most real estate markets remain strong. As we enter 2006, take an analytical view of the past, develop your predictions, identify your opportunities and prepare your financial plans for the coming year.

The Latest Trends
With the natural disasters of 2005 came significantly increased crude oil costs. While higher crude oil costs have become a reality, prices have trended downwards and are beginning to stabilize. Of course, the impact of higher costs will extend across many industries, including real estate. Commuting homeowners know that specific residential areas are more susceptible to economic fluctuations because of their distance from popular places of employment. The latest crude oil prices may exaggerate the variances and increase the demand for properties in city centers. The popular saying “location, location, location” will remain a reality in the real estate market.

The need to quickly rebuild hurricane-ravaged communities will also impact the real estate market. The cost of new home construction is expected to rise due to the tremendous demand on materials. As a result, the value of established homes and condos may have renewed importance as some prospective purchasers experience doubt or uncertainty about new construction timing and costs. In addition, the redevelopment of the damaged areas, subsidized by government funding, is expected to create employment and add to the economic growth. While the impact of the hurricanes is a temporary anomaly, its ramifications are likely to be felt throughout 2006.

Interest rates continue to be extremely favorable for home purchasers. The strong real estate market in most areas has been fueled by the down payment terms offered by banks and lending institutions coupled with historically low mortgage rates. While some forecasters are predicting a modest upward trend in interest rates, mortgage continue to remain at low levels, and real estate markets continue to boom.

New Attitude
As the economic forecasters make their predictions for 2006, you too must determine the best course of action for your financial investments. Rather than guessing when and where market prices will rise or fall, or where and when a natural disaster may occur, consider the advice always given to investors – manage debt wisely.

When purchasing or refinancing real estate, assess how well your finances will adapt to expected interest rates after the present mortgage term. Always consider when your mortgage term will expire and what options you expect will be available at that time.

Once you’ve made an investment, make protecting its value a priority. Maintain your home, particularly during strong economic periods. A well-maintained asset provides the real estate owner with the flexibility to leverage, pay down debt, or divest.

Once debt and maintenance have been accounted for, consider the purchases of non-essential consumer goods. When purchased with available disposable income, these items make life more enjoyable – and continue to fuel the economy. But, when non-essential items are purchased through over-extended refinancing, on credit card debt, or based on 0% down borrowing terms, the take an additional risk.

A New Outlook
Your best approach to 2006 is to make the most of your investments and investment opportunities. Manage your home wisely – from its debt load to its maintenance. Stay attuned to trends in the real estate market that are likely to follow future changes in economic conditions. Then, be ready to make the most of the opportunities that come with these changes. For example, increased interest rates may stimulate your desire to invest in income producing properties (such as rental properties) as first time buyers begin to shy away from the market. Whatever your approach, remember that it isn’t necessary to predict the future, but merely to be prepared for a range of reasonable possibilities.