Home Prices? Timber!

Well, home prices are down.

As Captain Renault might say: I’m shocked, shocked!

OK, maybe we’re not so shocked. What, with home sales dropping, more houses being listed for sale, and potential buyers having difficulty getting loans, it’s not surprising that prices are taking a beating as well.

Overall the S&P/Case-Shiller national home price index fell 3.2 percent from last year. It’s down to the lowest levels since the Index began in 1987.

While here in Atlanta, we’ve seen a slight rise in home prices, with a 1.6% year-over-year increase, overall the picture is pretty bleak.

So what does this mean for a real estate investor?

First: Deals can be found out there. For an investor who is looking to buy and hold, it’s definitely a buyer’s market. Competition among an increasing number of sellers is pushing prices down – and a savvy investor should be poised to take advantage of the good deals that are out there.

Second: For those investors who are looking at a quick turnaround on a property, it’s now extra-important to measure your equity well. Retreating property values can eat into an investor’s equity pretty quickly, and no one wants to end up upside-down in a house.

Third: If you’re selling, and most real estate investors are, now’s not the time to be greedy. We’ve said for years that a good deal is one in which you end up ahead: If you walk away from closing with money in your pocket, then you’ve done all right. Competing against all of the other homes for sale means that most investors have to be price-aggressive against desperate sellers wanting to unload homes that they can’t afford anymore. This is especially true given that most investors, if not holding long-term, are now marketing to prime-credit borrowers.

It’s always been important to have a good exit strategy when buying a house for investment property; the current marketplace is showing us how important that exit strategy is.

Home sales fall... again.

Just released today: existing home sales have dropped again.

This isn’t, and shouldn’t be, a huge surprise.

What is a bit interesting is the increase of listings. More people are trying to sell their homes, fewer of those homes are in fact being sold, and we now have the largest inventory of homes for sale since October 1991.

People will often list their homes for sale when they first recognize that they can no longer afford to make the monthly mortgage payments. With access to home loans significantly restricted; and unable to refinance into a more attractive loan, homeowners are left with few other options then to try and sell their house.

However, with this increase of sellers into an already-crowded marketplace, competing for fewer and fewer finance-worthy buyers, we should see additional downward pressure on home prices. And when these sellers are unable to find purchasers, a number will fall into foreclosure – and foreclosure rates are already at record levels.

The housing slump isn’t over. Not by a long shot.