The best assets to buy are typically those that are selling at the lowest prices. Stocks were a great buy when they were crashing from the fall of 2008 to the spring of 2009. Bonds were very attractive when interest rates were high in the 90’s and investors could lock in double digit rates for a decade or more. Now real estate appears to be hitting a similar cycle. Real estate is becoming a value investment in many markets. This is a guest post from Australia’s largest independently-owned mortgage broker Mortgage Choice. Since its inception in 1992, Mortgage Choice has helped more than 300,000 consumers find a suitable mortgage for their needs.
I think it’s very interesting how everyone was rushing to buy real estate after the bubble had peaked in the early 2000’s. There were so many buyers in the market looking to buy property when many homes had already risen 100% or more in a few years. The bubble popped and housing prices dropped. Now very few people are in the market and there is a lot of fear about owning real estate.
Fear often represents a great opportunity for value investors. There are a lot of signs that real estate in certain markets may be a good buy. Nationwide, the median sales price for a home loan dropped 5.2%to $156,100. That is the lowest price level since April of 2002. The interest rate on home loans is at 4.81% right now. That’s a little higher than the 4.17% back in November but still very low on a historical basis. Investors would have jumped to buy real estate at such low rates just a decade ago.
American consumers also have more disposable income than they have had in a long time. Household debt service payments are down to just 11.5% of disposable income. This is the lowest level that metric has been at since October of 1998. Prices are down an average of 30% across the country. Some areas have seen prices drop as much as 60%. Â Karl Case of the S&P/Case-Schiller Home Price index is bullish on the real estate market again.
“The lack of new home building is a huge help that a lot of people are ignoring,†says Case. “People think I’m crazy to be optimistic, but housing is looking like the little engine that could.â€
The combination of low sales numbers and low rates is making this the perfect buyer’s market. It’s a good time for real estate investors, first time homebuyers, and people seeking to refinance. There are quite a few bargains in the market today. The key is to buy a piece of property in the right market at the right time.
©2011 Buy Like Buffett. All Rights Reserved.
.
Buy Like Buffett – Make Money Investing The Warren Buffett Way
