It’s no secret that for much of the country the residential real estate market is in a tizzy. Foreclosures, slow demand and an ever abundant supply has caused prices to stagnate and/or decline. Over time every negative creates some positives. What are they? How can a wealth management strategy turn lemons into lemonade? Here are some thoughts. If you have some add them as comments.
Refinance: The Federal Reserve has reduced interest rates and the yields on Treasury Bonds are the lowest in several months. Clearly it is more difficult to get a mortgage but if you can, you may be able to lock in a low cost of money for your existing or future investments.
Gifting: With values down it may be a great time to gift the equity in your primary or secondary residences either outright or to a Qualified Personal Residence Trust (QPRT) for benefit of your loved ones. What may have been “too big” for gift tax purposes may be “just right” with a decline in appraised values.
Re-Negotiate: If you are under water (value less than your mortgage) it may be appropriate to have a conversation with your mortgage lender about different terms.
Opportunities: Whenever there is chaos and confusion in an investment sector there invariably is an opportunity to be evaluated. The “dream home” or “vacation property” that now is a reasonable price due to a change in circumstances and a slow market. There could very well be projects that become available in part or in whole due to slow market conditions.
We likely are very early in the residential real estate adjustment but to consider options and opportunities well in advance can be very helpful in putting in to place a well thought out strategy in to a sound wealth management strategy.