Is the Real Estate Market Ripe For Investing in 2010?

The past two years have been brutal for the real estate market around the country. No region has been spared. Not New York, not Washington, and certainly not California. Homes have lost incredible value from their peaks and homeowners are continuing to struggle mightily to keep their homes out of foreclosure. The federal government put in place programs that were designed to help these struggling homeowners, as well as to inspire first time homebuyers to dive into the tepid waters.

And yet with everything that has happened, and is happening at the moment, with the news out of Wall Street and D.C. continuing to dominate on the negative side of things, the question many would-be buyers are asking is whether the market is ripe for investing this year.

Look before you leap

The tax credit for first time homebuyers ended on April 30 and the interest rates are on the rise, so what is the answer? Should people jump in and start buying properties as investments? Or should they wait?

Each person is going to have a different set of circumstances, and expectations, so there is not going to be a one-size-fits-all answer to this question. No one can honestly say when the housing values will begin to rebound, when the most depreciated will start to show some signs of life, and growth. Also, any other government intervention is being a closely guarded secret, or is simply not going to happen in the foreseeable future.

An investor needs to weigh their own personal risks with the costs and how long they are planning or willing to remain connected to that investment property.

First-time homebuyers versus rental properties and more

The difference between the first-time homebuyer and the investor will be vast. The former will be living in their residence, turning what they would have spent on rent into paying down a mortgage, so for those individuals, the answer will most likely be that, if they are offered a fair mortgage rate, points, and all the numbers line up, there might not be a better time to invest in property than this year. Will property values increase this year? Next? It is difficult to forecast and the answer will depend largely on the region of the country that the person buys in.

For the investor who will either be renting out the property or sitting on it for a few years, the answer can be more ambiguous. We have seen many investors jump on short sales and bank owned properties because they believe the value simply cannot be passed up. Currently there seems to be no shortage of buyers, but financial institutions have been stepping up their foreclosure rate in recent months, largely due to a delay imposed, or requested, by the current Administration in exchange for the bailout funds they received.

Investors can be caught in a difficult situation if they are only planning on holding onto the property for a few months with the intention of selling it at a profit. If banks release foreclosed homes on the market in short order, then the value of that investor's home could stagnate. If that happens, then they will be paying a mortgage on a home they will neither be living in, or most likely renting.

Information, information, information

Right now we, as an industry, are uncharted waters. Ask twenty different brokers or agents two years ago, or even a year ago, what they thought the market would be like in a year and you would likely have a dozen different answers, most of them being positive. We have to remain optimistic about the future, of course, but what has been learned through these past couple of years is that the market is volatile and fickle.

If an investor has the financial resources to make that investment and not be risking losing everything if they can't sell, then now may be the best time to invest. The only answer any of us can offer with any shred of honesty is to seek out information and to not leap without looking first.

David