The Case for a Down Real Estate Market

Many lucky sellers saw their fates rise with the brief uptick in the real estate market. The housing tax credit, optimistic economic data, low mortgage rates and reluctant bank foreclosures set the stage for a fleeting rally in housing process.

More importantly, the real estate market re-opened for business with buyers snapping up homes at a faster rate (albeit at a steep discount to the purchased price). Of the factors listed above, the only enduring attribute of that market rise is the low mortgage rate.

Short-Term Real Estate Market Expectations

The sellers that missed the market or simply priced themselves too high in hopes of eking out a slightly larger profit will soon find themselves without a chair in the fast past game of musical chairs that is the real estate market. Many people are surprised at quickly the market turned sideways.

Unfortunately for many sellers, the expiration of the homebuyer tax credit coincided with renewed economic challenges. The job market remains soft; however, many jobless people face the end of their unemployment benefits. Legislation remains stalled that would either extend those benefits or provide outside financial help for jobless homeowners.

To further add to the perfect negative storm, banks finally got the foreclosure message. Listing of bank owned properties continue to increase and the high foreclosure numbers of the past six months have turned into even higher real estate inventory numbers in the market.

In the short-term, the real estate market faces a major supply and demand problem. On the demand side, consumers lost an $8,000 incentive to purchase a new home and they remain weary of the job outlook. On the supply side, bank foreclosures are flooding the market at extremely competitive prices dragging down an already challenged real estate market.

Real Estate Investor Opportunities

Real estate investors that missed the sale window should de-list their property and hunker down. Now would be a great time to lock a tenant in for one or two years until the market regains traction and the broader economy commits to a real recovery.

On the buy side, it is once again the time to go for big price concessions and target foreclosure opportunities. Given the above, the best strategy today is buy and hold. Flip opportunities will be rare in the next six months to a year and now is a great time to lock in great 30-year fixed interest rates. Buying big at deep discounts should pay huge dividends in the coming years.

Buyers should also avoid the hassle of short sales. There are too many opportunities in the market (read high inventory levels) to waste time, energy and money pursuing a short sale that could take six months or more. Recent foreclosures offer better discounts and can be purchased quickly. Now is the time to buy low