Depressed Real Estate Market - A Bad Thing?

We have all seen and heard the headlines:

'Economy falls into recession'

'More gloom for US homes market'

'The worst market crisis in 60 years'

If you were an average person, your first instinct would be to take all of your money and put it under the mattress. The fact is that most people make their decisions based on what they hear in the media. When they hear all of the negative comments on the current market environment, they get scared and the last thing they want to do is invest. The same was true during the real estate bubble in 2004 - 2006. A lot of people invested in real estate when hearing about the incredible appreciation in property values, then saw their investments crumble just as quickly when the bubble burst. This human habit really shows us that the majority of people make decisions based on what everyone else is doing. A wealthy person once told me "if you want to be successful, you need to be doing what everyone else is not doing. Go against the grain. Take risks."

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Foreclosures and short sales are flooding the marketplace, which gives real estate investors many great opportunities to put their money to work. That is if you are liquid, since the mortgage market is still very tight on their lending guidelines. Distressed sellers provide investors with the ability to purchase real estate at prices that are below market value. With values dropping more than 20% (40% in some areas of the country) over the past 3 years, properties are now more affordable for investors. The same property that was selling for $200,000 in 2007, you can now pick up for $100,000 - $150,000. 

Not only is the current real estate market producing great buys, you are now seeing an increasing supply of renters. Homeowners who recently went through a foreclosure or short sale will not be able to purchase a property for a couple years. This provides investors opportunities to get into cash flow producing properties. With all of the challenges that real estate speculation presented over the past several years, it is important to find opportunities that minimize risk while providing a stable ROI.

Credits: Scott C Pierce