Real Estate Bubbles, Prices, and Trends
Media Headlines, Fact or Fiction?
If you take some time reading real estate investing blogs and forums, you find that many people really want help figuring out how to make money investing in real estate. And it seems that the media loves to scare people with all the real estate bubble bursting, downturn in prices, and buyer's market talk.
Let's take a closer look at some the media headlines.
Real Estate Prices Crash - Fiction
Even though newspapers and TV news report that housing prices are dropping, they tend to confuse the facts. For instance, reports in our area says that the prices fell but what they really mean is that prices didn't go up as much as they did last year. According to Jamie Johnson with Keller Williams Realty, Riverside County didn't appreciate 30 percent in 2006 like it did in 2005. However, prices overall appreciated over 6 percent. Prices did not go down. In fact, southwest Riverside County saw significant gains.
New Home Construction Halts - Exaggeration
From the National Association of Home Builders (NAHB): "After years of the U.S. housing market exhibiting boom conditions, home sales and production have been on the decline and the market is now experiencing a cooling period." According to Forbes, building permits are only down six percent. If 2005 was a record-breaking year, a drop of six percent doesn't mean that new home building stopped.
Home Mortgage Interest Rates Escalate - Exaggeration
Perhaps rates budged upwards last week. However, mortgage rates had been sliding backwards for the previous six weeks. Mortgage rates seem to be more than fair considering the rates ten years ago.
Strong Buyer's Market Cools Prices - Half-Truth
This part may scare some inexperienced investors. There are 50 percent more houses on the market in some areas this fall compared to last fall. However, there is now evidence of a downward price spiral in any market. Trends indicate that it might take longer to sell today.
We sold a home last week that was listed for ONE day for full listed price. (We did agree to pay some buyer's cost but this was factored into the list price.)
Other Good News - Fact
The U.S. Department of Housing and Urban Development (HUD) decided not to increase the mortgage insurance premiums that multifamily developers pay for several key Federal Housing Authority (FHA) programs that support new construction or substantial renovation of affordable multifamily rental properties. If HUD increased premiums on October 1, 2006, from 45 basis points to 77 basis points, developers would have passed the cost onto tenants or declined building affordable housing.
Summary
If home sellers listen to the media and get scared into lowering their prices, the media predictions will become reality. House prices will drop. Investors will have an advantage buying bargain houses and renting them out. Desperate sellers and more tenants for rental houses make a great combination to make money.
The real estate market will make money for investors as long as people need housing.
Learn How to Fix and Flip Houses! (Or, fix for higher rents!)
Copyright © 2006 Jeanette J. Fisher
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