Are you one of the millions of investors waiting for the housing market to bottom out before you invest your hard earned dollars in real estate? If so, you may want to reconsider. Here’s why:
People reading the major newspapers or watching the mainstream news outlets are constantly bombarded with data showing the U.S. housing market continuing to decline–and this is true–for the overall national average. But real estate investment is not about “national averages”. When it comes to real estate investment do not think average–ALL REAL ESTATE IS LOCAL AND SPECIFIC.
During this recession falling housing prices have stricken different demographic, geographic, and economic areas all at different times. Sub-prime borrowers owning lower priced homes were the first to be affected. They were the first to lose their jobs, the first to stop paying their mortgages, and the first sector of the market to be foreclosed on by the banks.
As the housing crisis gained momentum owners of larger, more expensive homes began to be affected but unlike many of the lower-end homeowners, these homeowners had more assets at their disposal (savings, investments, income) to help cushion the blow. Unfortunately, housing prices have continued to plummet to the point where even many of the larger, more expensive homes have begun or are beginning to enter foreclosure.
Regionally speaking, California, Florida, Nevada and Arizona were the first areas to experience the crash and were also hit the hardest. This was mostly due to excessive speculation. However, the first to be hit will also be the first to recover as the banks work off their excess inventory of foreclosed homes. Once this happens housing prices in these categories will begin to jump. Many of the more expensive homes are just now entering into foreclosure and even though this may continue to keep the national average declining, many areas are already starting to see signs of recovery. Lower priced homes in these states are probably not going down any further and could already be on the rise.
In real estate, “national averages” are usually poor indicators for investment. To invest in today’s market you have to look at where the crisis began because those areas have probably already reached their bottom and are likely primed for recovery.