Tuesday, August 24, 2010

Real Estate Market: Priced to Buy

According to RealtyTrac, a total of 1.65 million U.S. properties received foreclosure filings during the first half of 2010. As of March, U.S. banks had an inventory of approximately 1.1 million foreclosed homes, which was up 20 percent from a year ago. Somehow U.S. banks have to get rid of this giant mountain of homes. Needless to say, this is going to have a significant depressing effect on housing prices.

The truth is that this is not a short-term downturn in the housing market. During the past two decades, an insane amount of debt fueled an artificial housing bubble that drove home prices to ridiculous levels. Now the U.S. housing market is trying to correct itself, and no matter how many trillions of dollars the U.S. government throws at the problem the fundamentals of the marketplace are still going to have their way eventually. According to Business Insider.com Michigan has 38.5% of the mortgages are underwater.

Now is the right time to bargain for a better price. The housing market has options across all categories: affordable, mid-income and luxury homes. The spurt of launches in the real estate market is not news anymore. With new names getting added to the list every month, there's already a supply glut. And, the pertinent question now is whether it makes sense to buy a house at this point. The basic law of demand and supply tells us that when supply goes up, the prices should fall. According to Trading Market.com when the market started recovering towards the end of 2009, developers gradually moved from affordable housing to mid-income housing, according to data available with PropEquity Analytics Pvt. Ltd, a Gurgaon-based property consultancy firm. In fact, in the last six months, the shift has become more pronounced with quite a few launches in the premium and luxury segments.

No comments: