We are currently experiencing the worst real estate recession this country has seen in decades. Property prices in some areas have fallen to the point where many people are paying more on a mortgage than their property is actually worth! In fact housing prices dropped at the fastest rate ever in February indicating that the housing slump is probably gaining momentum. The Standard & Poor’s/Case-Shiller home price index of 20 major cities fell by 12.7% in February versus last year, the largest decline since its inception in 2001. Seventeen of the 20 metro areas reported record annual declines.
Many builders and developers around the country have gone bankrupt, even the large ones that recently appeared financially solid. There are hundreds of developments scattered around the United States that have been left unfinished. And there are thousands of new construction homes that are either in the process of construction or have never been occupied.
In additional to all that, there are more properties on the market than there are buyers willing to buy. Many of these homes have gone into foreclosure because the owners lost their job or their adjustable rate mortgages have adjusted and they can no longer afford their mortgage payments.
Although many politicians deny the fact that we’ve fallen into a recession, the Federal Reserve has systematically lowered interest rates and in effect have also helped mortgage rates drop and stay low. Lenders and mortgage brokers are so desperate to make loans now that they are calling people they made loans to in the past in an attempt to try to get them to refinance.
What does this mean for you?
Opportunity! With housing prices dropping and interest rates still near historical lows, this is the perfect time to find good real estate deals and buy cheap.
Your goal should be to find investment opportunities in markets that offer the greatest long term growth and stability. These are markets that show growth in employment and population.
Target properties that you intent to hold for a short or long period of time. You will gain equity through appreciation as the markets correct and grow over time.
Be sure to only invest in properties that provide a positive cash flow in order to cover all of your operating expenses. This is very important in order to be able to hold the property long enough to benefit from the appreciation that comes over time with real estate.
On the flip side, this is not the perfect time to sell. If you own real estate, it probably makes the most sense to hold onto your investment until the market rebounds. As always, it will. In the meantime, take advantage of the market by either refinancing your own properties for lower rates and better terms, or buy more property that you can rent with a positive cash flow.
Remember that everyone needs a place to live. You should take advantage of these low mortgage rates and the abundant array of good deals to be found from motivated sellers, foreclosures, and builder liquidations. You will find buying incentives all around you.