Protecting Your Real Estate in a Low Market

by Kris Koonar - Date: 2007-02-10 - Word Count: 541 Share This!

The real estate market is a highly volatile scenario, and you need to watch its ups and downs closely, in order to protect your properties in a low market. An extensive research of real estate in your area is required, to be in tune with the latest developments in the property market. To understand how you can protect your properties in a low market, it is important to look at the present market scenario first.

Today, the prices of properties are extremely high. The interest rates are continually rising, making it more and more difficult for the common man to step into this rapidly expanding market. If interest rates continue to rise at this rate, at some point of time the prices of houses will drop, as such high interest loans would go beyond the reach of the salaried people. Borrowers are more inclined towards obtaining loans with adjustable rates of interest (ARMs). First-time buyers are the ones that are most affected, as they usually do not have other assets to be able to build equity.

A recent survey indicates that about twenty five percent of houses purchased in the year 2005, were purely bought for the sake of investment. The number of such speculative purchases is on the rise. However, when the market reaches its peak, there will be a huge decline in prices. This decline will mainly affect the speculators who have been in the market anticipating profitable deals. Builders these days have overbuilt their properties to lure speculators. To sell their excess inventory, they will be forced to drop property prices. Another important factor is that of limited credit.

As interest rates rise, borrowers will face greater difficulty in procuring credit. With lenders being apprehensive of investing more money in the risky market, the total money available in the American economy for home purchase will shrink radically. With less money available in the financial market, liquidity in the economy goes down. It is a vicious cycle, with maximum impact on property prices. Even if property values dont go up, the market will have plenty of low cost starter mortgages.

To ensure that your property gets the best deal even in a relatively low market, make sure that you buy properties in prime locations with a constant demand. Instead of speculating, go for safe fixer-uppers that will be in demand even if the market rates go down. Another option of playing it safe in the real estate market is to go for old properties. By renovating such properties and giving them a face-lift, you can boost the property value substantially. You would be surprised to know that the profits you incur by selling renovated properties are many times more than the actual renovation costs. You can also consider overseas properties for investment.

To protect your real estate from declining values, there are several schemes available in the market, which ensure that you do not run into a loss in spite of low market prices. The extraordinary option of locking the price can be a great consolation for homeowners who dread the fluctuations in the real estate industry. The best part is that such schemes are available at reasonable rates. To be on the safe side, employ the services of an expert real estate agent.

Related Tags: real estate investing, wholesale investment houses, mls, multiple listing services, fsbo

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