California and many other states have just lived through another real estate bubble, this one caused by the extension and expansion of the first time home buyer tax credit giving $8,000 to first time home buyers and $6,500 to existing home buyers. As the April 30 deadline to get under contract drew near, homebuyers anxious to take advantage of the tax credit caused a $20,000 spike in the median home price.
The bubble may have been short lived but, it points out the risks of government meddling. This brief bubble also clearly demonstrates the risks of investing with the crowd. Our contrarian investors with the patience to wait for a great deal have watched all of the price gains of 2010 erased. Now we can let the real market determine home values.
Could prices drop further? Sure. How much? That depends on the local economy. Some areas are improving. With interest rates reduced to historic lows, the best rates in 40-years, the cost associated with increases in interest rates will likely occlude any price decreases. This is a great time for the buy and hold investor who can strike a good bargin.
To keep an eye on important trends for your local real estate market, be sure to visit FinestExpert.com
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