Investors Take Note!

Is Now The Time To Buy a Foreclosure?

Is real estate ownership dead and done as a financial opportunity, or is there more value to be extracted from housing? Indeed, is now a good time to buy real estate — or not good at all?
Perspective
If we are to think of real estate as an investment then all the usual caveats apply. There’s no assurance whatsoever that prices will always rise or that they will rise at all. There’s no guarantee that vacancies can be avoided or that the need for repairs will not create losses
But so what.
All forms of investment represent some level of risk. Not only do all forms of investing represent risk, not investing also represents risk, the possibility of missing benefits as a result of inaction, what economists call an opportunity cost. While it might somehow be comforting, hiding in a financial rubber room is not a likely path toward economic advancement.
The Contrarian View
The current situation may not be a bad thing if you’re on the buying and investing side of the equation — and you believe that real estate should be held for the long term.
While much is dark and gloomy, a number of fundamentals remain in place which greatly favors real estate:
• Mortgage rates are now at or near historic lows. Loans around 4.5 percent are currently available.
• Property prices have taken a beating. In most communities, foreclosures and short sales produce even larger discounts.
• Real estate investment continues to enjoy substantial tax write-offs for mortgage interest, property taxes, insurance, depreciation, repairs and other ownership costs.
• The population is growing while at the same time homeownership is down.
• There’s some evidence that public views have become more positive
The Case for Investing
If you look at the investment factors outlined above you can see that interest rates are near historic lows. The nation is flooded with foreclosures and short sales, a flood which pushes down local home values but a flood which will one day recede. Home prices are down but rents are up. Tax benefits remain in place. The demand for rental housing is strong, in part because millions of people no longer have down-payment money or an interest in buying — or they’ve lost their home to foreclosure or a short sale.
Many local markets seem to be stabilizing if not showing some signs of improvement. You have to wonder how many people in 2015 will look back and say ‘I wish we would have bought a few years ago in the good old days when mortgage rates hovered around record lows and home prices were down.’
Will home values rise in the future? Will rental rates increase in selected markets? No one knows for sure, but it seems logical to believe that values are most likely to go up if you don’t buy at the top of the market — and we haven’t been at the top of the market for better than three years.
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Reprinted in part. Original article By Peter G. Miller

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