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.
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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.