Get The Facts On This Declining Real Estate Market

A declining market in real estate is when home values start to drop instead of increase.  Some areas experience a higher percentage of decline than others and this market condition can be local in nature or far reaching.  

Real Estate market conditions are cyclic in nature as a general rule and many things must be considered to accurately predict these cycles.  Currently, we are seeing the real estate market and home values being driven by the large number of foreclosures, short sales and REO's out there.  In days gone by, a Real Estate Appraiser would go out to appraise a home and use the most recent sold comparables to that home.  If there happened to be a foreclosure sale in the subject home's neighborhood, that sale price was not given serious consideration because it was not a true arms length transaction.  It was the exception to the rule, so therefore, either not included if there were enough comparable properties out there to use that were not foreclosures, or were just not given any real significance to determining the subject home's value.  At present, there are so many foreclosures, short sales and REO properties on the market that a Real Estate Appraiser can no longer ignore the sale prices of these homes. So their sales price, or their value, must be considered and factored in to determine a home's appraised value.  This is not making too many Sellers happy.  

A short few years ago, the real estate market was booming. Prices were on the rise and Home Buyers were out in droves trying to get a piece of the American Dream. Unfortunately, not all Buyers could qualify for a home loan for one reason or another. The flood of unqualified Home Buyers gave birth to Easy Qualifying Loans, and Predatory Lending Practices. Some of these practices included Negative Amortization Loans, Interest Only Loans with balloon payments, Adjustable Rate Mortgages with high interest rates just around the corner. Buyers could afford the initial payments on these Home Loans at first, but it was just a matter of time when these loans would need to be refinanced. Buyers who just barely qualified for the original loan, could not afford to refinance. And as more and more homes fell into foreclosure, home values dropped and these Buyers found themselves owing more on their homes than their homes were currently worth. If a home cannot appraise for the needed loan amount, the Buyer was out of luck with no place to turn. Foreclosure or a short sale were their only options.

The short answer to this question is YES.  With predatory lending practices being curbed and the promise of interest rates coming down, now is a great time to buy a home.  Look at your finances honestly.  Can you afford the payment easily?  Is the interest rate you're getting a Fixed Rate or an Adjustable Rate?  If it is an Adjustable Rate Mortgage, can you afford the payments when the rate goes up?  How much money can you put down for a downpayment?  How long do you plan on living in the home?  All of these questions should be looked at seriously.  If you are planning to buy a home as your primary residence, you can get some great deals out there.  Just make sure that the terms of your home loan is something that you can realistically live with.  If you are an investor, make sure that you can afford the payments on this home until you can either rent it, or until the prices come back up to where you can see a profit on the home's sale.  Don't be fooled by an initial low payment.  Get all the facts.  When will my Adjustable Rate Mortgage adjust and how often and to what interest rate.  It's exciting to buy a home.  Just make sure that you will not be a victim of foreclosure in a couple of years.  Remember that home values will most likely decrease for a little longer before they start to rise.  But they will rise again.  Just how long that will take is anyone's guess.  There are plenty of opinions out there and statistical forecasts.  With all the gloom and doom, homeownership is still alive and well and still the American Dream.  Choose your property carefully and your home loan even more carefully and all should be well.  Work with a reputable Realtor.  Ask questions and ask for references.  With common sense and good sound advice on your side, you can't go wrong.  Happy House Hunting!!!