If you read many of the real estate investment blogs and forums today, you'll find that a sizable number of people are really concerned about whether it's still possible to make significant amounts of money investing in real estate. It seems as if a fair number of folks have been frightened by headlines they read in the media about a burst in the real estate bubble, a downturn in prices, and the number of homes on the market. Is any of that doom-and-gloom talk true? Let’s examine some of the headlines to find out.
Home Prices Down
First we'll look at the bursting of the real estate bubble. Home prices in some parts of the country have declined somewhat over the past year, but there are a number of areas that have still seen increases in real estate prices during that time. What the media is really telling people (although not very effectively) is that price increases have slowed down. Having real estate prices increase at a slower pace is very different from having the actual price of homes begin to slip into negative territory.
Home Construction Stops
Another headline we often see is that new home construction has ground to a halt, but that's not true, either. According to recent figures from the National Association of Home Builders (NAHB), building permits nationwide are only down six percent from 2005. Admittedly, that is a decrease, but hardly enough to imply that new housing construction has stopped altogether, especially when you stop to consider that 2005 was a record-breaking year for new home building! A drop of six percent from an all-time high is far different from saying that new construction has disappeared.
Mortgage Rates Climb
A third headline you've probably read is that home mortgage rates have begun to take off again. There have been some increases, but they'd been at very low rates for a number of years, and the increases have been slight. The average mortgage interest rate is still a considerable bargain when compared to even a decade ago, and rates have actually decreased slightly over the past six weeks. Even the federal government doesn't buy into the idea that rates are increasing. In fact, the U. S. Department of Housing and Urban Development (HUD) recently decided not to increase mortgage insurance premiums that multifamily developers pay for several key Federal Housing Authority (FHA) programs that support new construction or renovation of affordable multifamily rental properties.
Homes Sit on the Market
One of the scariest things that inexperienced investors have been hearing is that homes are taking longer to sell and are selling at lower prices. Again, that's not necessarily the case. In our own area, my husband and I listed one of the homes we had remodeled and sold it in ONE day, and for full price! Although we did pay some of the buyer’s closing costs, that possibility had been factored into the price when we listed the home.
The bottom line? Don't let the media tell you what to do in your area. If you do your homework and become an expert on the real estate market in your own target area, you'll know what a home should sell for once you're done the repairs and remodeling. You'll also know how much of the nationwide trends being reported on in the media apply to your neighborhood. There's no such thing as a one-size-fits-all real estate trend. All that matters is if you can make a profit on buying and selling homes in YOUR area.
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Jeanette Fisher teaches beginning real estate investors five ways to make money in any real estate market. She specializes in Lake Elsinore Real Estate but helps home sellers and investors worldwide with free buying and selling information.