How to Handle the Housing Market for the Next 4 Years

Posted on December 5, 2008
Filed Under Investing | Leave a Comment

The US housing market is currently in a slump for a number of reasons.

Among these reasons:

the increasing number of foreclosures as sub-prime borrowers default on their loans

the related tightening of the credit market

the high level of debt many consumers now carry

and the unemployment that resulted as housing supply exceeded demand

However, the housing market is expected to start its turnaround in the next couple of years, so buying property now could be a great idea for the investor with some cash.

The Real Estate Boom of 2005

During the height of the housing boom in 2005, mortgage lenders offered loans to just about anybody.

Home ownership was touted as the fulfillment of the American Dream. After all, don’t we get to deduct our mortgage interest on Schedule A? That proves Uncle Sam himself wants everybody to own a home.

In the face of all this persuasion, many people were able to convince themselves that taking out an adjustable rate mortgage to buy a home they could not afford was the patriotic thing to do.

Resale Woes

In addition, many investors bought property for resale when the market was up. Some of the property was still under construction. By the time the properties were completed, the market had begun to weaken and these owners found themselves facing foreclosure. They were “upside-down” on properties they could not resell.

Now, many of these same people are in foreclosure. So, how did all this fall apart?

The ARMs adjusted and they could no longer make their payments.

Investment units remained empty.

Lots of homes became available, driving the value of everything down.

New construction dried up and the workers lost their jobs.

Recoiling in horror, the lenders tightened up their loan qualifications.

How long will it take this situation to turn around?

Most analysts suggest 2-3 years. The population does continue to grow, so demand will eventually catch up with supply. Also, the number of single-person households is increasing due to divorce and longevity.

The current state of the housing market holds promise for the investor who can out wait the slump. The same rules that apply to the stock market apply to the housing market: buy low, sell high.

Buy Low

Most analysts agree we are at or near the bottom. Prices are low and they may not get much lower. There is a good selection of properties available.

A slump in the housing market creates problems for some and opportunities for others. However, the American economy has always had ups and downs. As an informed investor, you should consider buying property now.

If you are looking to jump on this prime opportunity to invest in foreclosed property while it is still cheap, you should check out John Beck's clear and simple system of buying foreclosed properties for pennies on the dollar.

Real Estate 4 Pennies is written and maintained by Steve
Tips and Articles About Foreclosures, Bank Owned Homes, and Real Estate Investments

Share and Enjoy: