experts say:Housing prices dropped 33% since the ever peak, is this a right time to invest in RE?

experts say:Housing prices dropped 33% since the ever peak, is this a right time to invest in Real-Estate? 
what if the Interest rates go up? could that make the scenario of prices decline worse?
with banks holding foreclosures properties with the numbers rising every day, wouldn't that effect the prices to additional price decline?
  • July 21 2011 - Brentwood
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Answers (10)

It could be a great time to invest in real estate, even though prices might go down even more.

The first thing to consider is your investing strategy, are you in it for the long term ie: buy and hold or in it for a quick fix or flip?

The quick flip oppotunities are really for seasoned pro's that can control their costs ie: have relationships with reliable contractors, and the market knowledge to price agressively and sell quickly... extremely difficult in most markets today and very risky, if you don't sell quickly, and the prices are falling you can get stuck....

However, the buy and hold strategy can be less risky, if you buy the property a t a price that leaves room to rent above your carying , fix-up and vacancy costs.
So even if the prices drop over the next several years, you can continue to have a positive cash flow to take you through to the time that the market eventually turns around.

So you need to analyze your carrying, fix-up and vacancy costs and make sure that the area you are investing in can support your monthly 'nut' with a  margin for profit. I recommend  a 3bedroom , 2 bath home in a good school distict as a minimum, so you can unload it when the time comes.

Good Luck Huniting!


  • July 30 2011
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Profile picture for SteadyState
Sharon Lewis says:
1. "Noone has a crystal ball"

and then goes on to say:
"Here's the thing, even if it drops more, you are still living in a place you own, you still get to deduct your mtg interest rate."

Translation: It's ok to loose your hard earned money but not my commission.

She also adds:
"I can tell you Brentwood is a great area to live. If you can invest in that area, go for it,or Santa Monica. 
Five years from now it won't matter anyway, right? "

Translation: I (Sharon) can contradict myself in even short simple posts (see 1).
  • July 26 2011
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Profile picture for Sharon Lewis
Here's the thing, even if it drops more, you are still living in a place you own, you still get to deduct your mtg interest rate.
Noone has a crystal ball, otherwise most real estate professionals would be buying and selling for themselves.
I can tell you Brentwood is a great area to live. If you can invest in that area, go for it,or Santa Monica. 
Five years from now it won't matter anyway, right?
  • July 26 2011
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The "experts" are usually reporting on the national average which is little help to you when looking at the real estate market in terms of investments. You always need to look at the local area to determine the health of the local economy & real estate market. When you buy real estate for investment purposes it's best to make sure you can do so with an equity position and time. If you possibly "need" to sell to raise cash, it's always possible to loose money. Real Estate is best for a long term investment.
  • July 26 2011
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All real estate is "local".  In other words, there are always good deals to be bought if you are looking in the right market.  What is the right market?  One that offers sound economic fundamentals, a stable or healthy housing market, and good rental demand.

We guide and advise our clients to help them invest in the right markets so they can build a wealth building portfolio of investment properties.

Feel free to download any of the many free reports on our website.

Good luck,

Marco Santarelli
.
  • July 25 2011
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Profile picture for Mills Realty
It really depends on what rate of return you want on your investment.  If you are in it for the long term and the property will run a positive income then even if the market fluctuates down further you are still in a good position.  Long term the market values will rise, so if you have a long term hold on a positive income property you will be fine.
  • July 25 2011
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Profile picture for sunnyview
If interest rates go up significantly, buyers purchasing power will drop and prices will drop. You have to weigh the difference between rent and PITI to see if it makes sense to buy now in your market.

Unemployment and underemployment is also a factor in the strength of the overall housing market so that's something to consider before you buy too.
  • July 22 2011
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Profile picture for dennygiza
This is a great time to invest in real estate. Considering that it's next to impossible to find the bottom of any market (or top for that matter) you have a lot of things on your side. With historically low interest rates, much lower real estate prices, and a good inventory, I'd say your down side risk is pretty low. As with any other investment in any asset class, do your homework. Find a good buyer agent and have at it! Good Luck!    
  • July 22 2011
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Profile picture for Mevin Barnes
I think now is excellent time to invest in real estate, specifically in rentals.  In my market (Deltona, Fl) prices have decline over 50% from the peak giving investors an opportunity to pick up rental property very cheaply.  Add in the rising rents and investors are seeing a fairly good return.

For those who want to flip a property you need to be careful since current market stats indicate home prices are declining slightly.  Make sure you purchase the home with enough cushion (profit margin) and you should be OK.  Homes that are priced well and are in good condition move very fast here but again this is just my market.  Every area is different.
  • July 21 2011
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It's always a good time to buy a property that is in the right location and priced correctly.  Could prices decline further?  In many areas - absolutely.  Until employment numbers improve, there will be a steady flow of bank-owned inventory coming on the market in addition to normal turnover of homes sold due to the usual reasons (upsizing, downsizing, relocation, etc.).  As long as inventory is high and lending is tight, prices will continue to decline.  However, we're already seeing prices increase in some neighborhoods where employment is up, such as parts of Silicon Valley.  All real estate - and real estate investing - is local.  Regarding interest rates, they have to go up.  They are so low now that there is almost no room for them to go down any further without giving the money away.  But keep in mind that the real estate market had good periods in the 1980's and 1990's when mortgage rates were 8% to 12% for highly qualified buyers.

  • July 21 2011
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