Home Prices - What's Happening?

What This Means...
A declining real estate market is not always bad. For those of you who do not presently own a home, this may be the perfect opportunity to buy.

For those of us that do own a home, we may be able to benefit by purchasing investment property at a decreased price.

Let's take a look first at why this decline is happening and what we can do to take advantage of this opportunity.

What's Happening

As we entered into a recession after the 9/11 attack on our country, we financed our way out of this recession by manipulating the housing market.

We needed a catalyst to improve the economy and create investment so the Fed lowered interest rates. The result was an infusion of adrenaline into the economy stimulating growth in the housing sector and many fields related to housing.

Home ownership soared and home prices began reaching all time highs with record growth.

The short term effect was a miraculous rebound from our economic woes. The long term effect demanded the housing market correct itself. This correction is presently taking place nationwide.

In addition to this rapid growth, lax underwriting standards for home mortgages allowed people to be qualified for mortgages they could not afford.

The resulting foreclosures will increase the supply of homes for sale in the marketplace, thus driving down prices.

The Opportunity

As the value of home prices decreases, the opportunity for buying investment homes increases.

Not only do I like the idea of buying low, but also the opportunity for renting in this market. If we do see record levels of foreclosures, this will increase the number of people looking to rent.

This may be a perfect opportunity to buy a second home as an investment, or hold a rental for 5 years and then sell when the housing market rebounds.

If you do decide to jump into real estate investing, be careful as there are risks. And be sure to consult your local professionals for advice.