a TOTAL ECLIPSE of the sun…
coming to a home near you

by Steve Nassar

A total eclipse of the Sun is quite possibly the most spectacular event in all of nature and cannot adequately be conveyed through words or photographs. Few have ever witnessed one, but once seen, it is said to be an experience never forgotten. In a matter of minutes it can change from a hot, sunny day to a cool, dark night. The sky takes on an eerie twilight as the Sun slowly disappears behind the dark side of the Moon. When the total eclipse phase, or “totality” occurs, it becomes almost as dark as night with absolutely no moonlight to compensate. The temperature drops noticeably. The total phase of a solar eclipse is very brief, rarely lasting more than several minutes.

While the Sun is completely obstructed, the pitch black Moon is surrounded by a beautiful halo known as the solar corona. This plasma atmosphere surrounding the sun is nearly two million degrees in temperature and is only visible during this extremely rare phenomenon. Scientists who study the Sun’s corona will often have to wait years and travel great lengths to catch a glimpse of one during a total eclipse.

In ancient times, and even in some cultures today, a total eclipse could be frightening for those who were or are unaware of the astronomical explanation, as the Sun seemingly disappears in the middle of the day and the sky darkens in a matter of minutes. However, as the moon eventually glides past the sun and the sky begins to lighten once more, they would most likely realize that they had experienced something remarkable, something they would talk about for a lifetime.

To see a total eclipse in a person’s hometown is extremely rare as it requires the perfect alignment of three objects orbiting in space: the Sun, the Moon and the Earth. Around the world there is on average only one total eclipse visible every year and a half or so. Since the Moon is much smaller than the Earth, when one does occur, only a very narrow track of the Earth (less than 100 miles wide) is totally obstructed from the Sun. Following the rotation and orbit of these three entities, this path of totality will then travel a corridor thousands of miles long and all those who fall within this area are able to see the total eclipse.

A partial eclipse can be seen by a much larger area outside of this relatively small corridor with the degree of the eclipse determined by one’s location. It is extremely rare for a person to see two total eclipses from one location in a lifetime. You would have to wait an average of 370 years to see two total eclipses from the same place. The last total solar eclipse visible from the entire continental U.S. occurred on Feb. 26, 1979. The next total solar eclipse visible from the U.S. will occur on Aug. 21, 2017.

As fascinating as the subject of a total eclipse may be, it noticeably parallels another rare phenomenon that is currently taking place. A total eclipse is strikingly similar to the opportunity that has recently presented itself for anyone who is fortunate enough to be in a position to buy a home and does not yet own one. There are three individually fantastic reasons that are perfectly aligned making right now a once-in-a-lifetime opportunity to purchase a first home. These three reasons are as follows:

1 - High Inventory
I almost called this category “Tremendous Value”, but then I realized that title didn’t capture the full scope of this advantage. You see, tremendous value (low prices) and high inventory (many to choose from) are two very different, yet intertwined blessings. High inventory usually creates tremendous value but tremendous value alone doesn’t necessarily create high inventory. So this category is about the high inventory that is causing the tremendous value in the housing market today.

Rarely has there been a time such as now when there are homes that can actually be purchased for less than the hard cost to simply build the structure, let alone the cost of the land that it sits on. I’ve observed numerous clients purchase very nice homes for less than $90 per square foot. Even an inexpensive home can hardly be built for that cost. This is a brutal fact for homebuilders, but a blessing for homebuyers.

Keep in mind, however, homes in the lower price ranges are approaching levels where the difference between the costs of owning versus renting is rapidly closing. One cannot assume that all price points will bottom at the same time. The purchasing power of many is and will be concentrated in the more affordable price ranges where financing is still readily available with a fairly small down payment.

At the very least, look for a slowing in the rate of decline for lower priced homes if not an all-out stabilization or correction upwards from their currently undervalued position in many areas. This stabilization could occur without the general public being conscious of it. This is because many people attempt to gauge a bottom by watching the median sales price index. This index can be misleading for a couple of reasons. First, this index typically lags at least two months behind what is actually happening. Trying to time a bottom based on information two months old is like trying to drive a car while looking in the rearview mirror.

Secondly, this index measures how the average sales price of an entire region is trending. The problem is that this is a very broad measurement and therefore can be confusing. When an area’s median sales price is down 10 percent, it does not mean that every single house has had its value drop exactly 10 percent. Remember that was the average. One house may have had its value drop 25 percent and another may have appreciated 5 percent. A troubled neighborhood or area of town may have seen values recede by 35 percent while a hot pocket may be experiencing a 15 percent bounce off of a fundamentally unsustainable low.

In all of those cases, when you combine the data, the average sales price ends up being down 10 percent. However, a person who is in the market to purchase the home that appreciated 5 percent or in that particularly hot area would be doing themselves a severe disservice if they were only watching the region’s median sales price index to gauge a bottom. Along these lines, it’s quite possible that the value of homes in the higher price ranges could continue to collapse at a far greater rate than the moderation of decline or even gain in the lower price ranges. This could happen due to the drastic contraction of jumbo, stated income and negative amortization financing. If so, this could skew the numbers of the closely followed median sales price index making it appear as if all prices are still falling. This means a recovery in certain areas and price points could slip under the radar if a potential homebuyer was not working with an expert real estate agent who has his or her finger on the pulse of the real-time market for the specific type of house within a certain area for which one is looking.

Furthermore, after a visible bottom has been reached, buyers may still be able to find some great bargains in the housing market. However, as longtime industry expert Mike Hasson has said: “at that time, there will not be the same opportunities to find and negotiate favorably on premium properties that otherwise may have never even hit the open market.” Think of it this way: The current housing market is comparable to going into your favorite department store and seeing that almost every last item in the store is deeply discounted. If you wait until the very last day of the sale, what items are left? After a marked bottom, the housing market will be like that department store with mostly the unpopular and less desirable merchandise discounted and in plentiful supply. The lower the price point, the more this will be true.

The worst thing about this won’t be that buyers may have to bid higher to get the home they fall in love with. I don’t think that notion necessarily bothers people so much. No, the worst part about competing for the best remaining homes once a bottom is officially announced will be those times when a buyer does bid higher and still loses the home that they love to someone else. Imagine the disappointment one feels in having lost the home that they had toured extensively, had begun picturing their life in, and now have to compare every future candidate home to as they begin their search again.

2 - Historically Low Interest Rates
Historically low interest rates combined with tremendous value create unbelievable affordability. The National Association of REALTORS® has a measurement of the overall affordability within the national housing market. This National Affordability Index factors what home price a person earning the median income could purchase, in relation to the actual median home sales price, calculated using the currently available mortgage rate. This is an index that has been measuring the housing market month after month for almost four decades. Recently, this index began showing clearly and unequivocally that homes right now are far more affordable than they have ever been in the history of tracking
housing affordability.

According to recent data, approximately one third of Americans do not own a home. That statistic puts into perspective the potential number of first-time homebuyers who could be in a position to take advantage of this incredible opportunity. There are many people who were priced out of the market just a few short years ago and are now realizing this seldom mentioned blessing of the current market and economy: Homes are extremely affordable.

Interest rates right now are very close to record lows. Low interest rates are particularly significant because often in the past when prices on homes receded significantly, this was accompanied with inflation and its evil sidekick, high interest rates. This bad combination counteracted the lower home prices, and therefore affordability was damaged as a result of the higher payments. This was certainly the case in the early 1980s when interest rates on 30-year fixed mortgages reached well into the teens. There was absolutely no real estate version of a total eclipse of the Sun then.

Many economists and experts agree with legendary investor Warren Buffett who recently commented on how it is very likely that a bi-product of a recovery in our economy will be high inflation. If so, the laws of the market simply forbid long-term finance rates such as a 30-year fixed mortgage to be at or below 5 percent if inflation itself skyrockets to that level or higher. Money must be loaned out at a rate that is higher than the rate of inflation. Otherwise, inflation would erode not only the profits but possibly even the original investment. If inflation fires up as a result of the government’s flood of capital into the market, then interest rates could also quickly shoot up.

Right now the vast majority of first-time homebuyers are using government-backed loans to fund their new purchase. As of this writing, rates on all three types of government loans are very close to 5 percent. They’ve been in the same range for a while, and for those of you who are waiting, I’m sorry to say they don’t seem to be going much lower.

Even if that exact rate is not quite available on the day one goes to make an offer, it can easily be asked in the offer that the seller credit an amount that would buy down the loan to that rate. Don’t risk waiting for a certain rate to come to you and instead ask that the eager seller take you to that rate.

In the box to the left, notice the sample loan scenarios for a home priced at $200,000 on all three of the most common types of government loans: FHA, VA or Rural/USDA. Most of the costs associated with the purchase can be asked to be paid by the seller other than the minimal 3.5 percent down payment required only on the FHA loan. (Eligible Veterans and those who qualify and are purchasing in designated Rural areas can obtain 100 percent financing with no mortgage insurance required.)

As you can see in the loan scenarios the monthly payment is not much more than a similar home would rent for. Also, remember that when you buy a home with a 30-year fixed mortgage, the principle and interest payment is fixed for life. Even if rent is less right now, will that continue to be the case in five or ten years? Of course not.

3 - Cash Paid for Purchasing a Home
As part of the stimulus package in February 2009, the president signed into law an incentive giving any first-time homebuyer purchasing a primary residence between January 1, 2009 and December 1, 2009 a tax credit of $8,000 cash with no repayment required. (For more information on this tax credit, go to www.federalhousingtaxcredit.com.)

A first-time homebuyer is defined as anyone who has not owned a home in the past three years. Just like a tax refund, the money will be paid out upon filing taxes after a buyer has made his or her purchase. There is currently no mechanism that allows a person to have access to this money upfront in order to use it as a down payment, but prospective homebuyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his or her take-home pay. This money can then be applied to their down payment. Keep in mind that FHA loans do allow for gift funds to be used as the down payment.

Also noteworthy is that if two people who are unmarried are purchasing a home together and only one of them is a first-time homebuyer, that person still qualifies for the full amount of the tax credit. This is especially helpful if a person needs to use a non-occupant co-borrower on an FHA loan to assist in qualifying.

What if someone doesn’t qualify for the tax credit? Would buying a home still be beneficial with only two of the three key advantages aligned? Of course – that would be a moment as rare as a partial eclipse.

A Partial Eclipse
If a buyer already owns a home or doesn’t qualify for the tax credit, he or she can still capitalize on the opportunity that a partial eclipse offers. It’s still something quite remarkable to be able to choose a home sold at a tremendous value from the vast inventory available and have it financed with historically low fixed rates.

Even if you already own a home and are simply ready to upgrade, you are still benefiting and coming out ahead despite the fact that you will also have to sell in this same market. If you are indeed moving up in price, then you will be on the buying side receiving the same percentage of discount on your new, higher priced home as the percentage hit that you took selling your former, less expensive home. This translates to more money gained on the new purchase than was lost on the sale of one’s former home.

In ancient times, when a total eclipse of the Sun would occur, people would often be frightened and confused. They didn’t understand why each second grew darker than the one before, until there was actually complete darkness in the middle of the day. But, as you can imagine, once the Moon began gliding past the Sun and it became apparent that daylight was returning, people no doubt would only then appreciate what a once-in-a-lifetime opportunity they had just observed. Unfortunately, they would most likely not grasp this fact until after the complete darkness had passed. The best opportunity faded with the darkest moments. Then, as the Sun and Moon moved away from each other, every second that passed meant even less of an opportunity to witness this phenomenon. Finally, they moved completely apart and there was no opportunity at all.

Similarly, this dark economy will also pass. First, it will be an ever-so-slight hint of daylight returning, gradually growing brighter and brighter. But, for those who are waiting for this to happen prior to buying a home, remember one thing: Once the darkness subsides and is replaced by the first flicker of light, the best opportunities, the likes of which one may never see again, will have already transpired.

Furthermore, the longer one waits after that, the less opportunity there will be as the market shifts and it becomes more and more obvious that daylight is returning. This eventually leads to such a point as to where there is no significant opportunity at all. If you are in a position to purchase now, don’t allow market negativity to inhibit you from taking advantage of what could be the best and most affordable opportunity that you will ever have at buying a home. Bottom-line: Anyone who is in a position to buy now is one of the fortunate ones who will be able to purchase at a time as rare as a Total Eclipse of the Sun.

Monday - August 21, 2017
A total eclipse of the Sun is hitting close to home in another way.

This will be the first total eclipse visible from the contiguous United States in almost 40 years. It will also be the first time that an eclipse has a path of totality that crosses the entire nation, from the Pacific Coast to the Atlantic Coast in almost 100 years. The last one was in 1918. The path of the upcoming 2017 total eclipse will make its first landfall on the Oregon Coast.

The solar eclipse travels across the country as if on a track called the centerline, with a path of totality approximately 50 miles in each direction away from the centerline. This creates an area about 100 miles wide in which a total eclipse will be viewable. The centerline of the 2017 total eclipse will land almost directly between Lincoln City and
Newport at 5:17 p.m., allowing both of those cities to experience totality.

This centerline then travels across the state running through the Willamette Valley close to cities like Monmouth/Independence and Stayton. This means that totality will be visible in the Willamette Valley from any area between McMinnville and Aurora on the north side spanning south all the way to Halsey and Brownville. All those who live in between those two points won’t have to travel to observe a total eclipse as it will be coming to them. However, the closer one is to the centerline the longer the duration of totality will last. Salem is the largest major city in Oregon that will be very close to the centerline so the capital monument there will have a backdrop of a total eclipse lasting more than two minutes. As the visibility of the eclipse crosses east through the state, the centerline will cross almost directly through Madras, thereby also putting the city of Redmond in the path of totality as well.

The centerline and area of totality will first pass through a corridor in the host state of Oregon and then move out diagonally across the rest of the country exiting close to Charlotte, North Carolina. No one in the continental U.S. should have to travel very far in order to observe a total eclipse. The areas of Oregon that will experience totality can expect to be filled with visitors traveling from Canada, Washington, California and beyond, attempting to preview this once-in-a-lifetime phenomenon. Of course, a much larger area outside of that narrow track of totality will see a partial eclipse to one degree or another depending on how far away they are from the centerline. Because it will be taking place in August, most can expect to observe this total eclipse on a warm summer afternoon with a good chance of very few clouds blocking the view.

For a great interactive map of the country showing the path of totality the eclipse will follow on August 21, 2017, visit: Click Here