Real estate is a traditional investment instrument that, at one time, was considered an almost sure bet for making money. Then, along comes 2007, when the housing bubble burst. It left investors shy to reinvest, and real estate lost its reputation as a safe investment. In addition, if you are reaching retirement age, you do not have time to rebuild after a crash. Currently, the number of people wanting to buy a home is outpacing those willing to sell, causing high prices. So the question is, is real estate a good retirement investment, or are we in for another fall?
What Are the Current Real Estate Trends?
According to the National Association of Realtors, the current year’s figures look promising for investors. In 2020, total U.S. Home sales rose 22.2% over 2019 numbers. This equals 6.76 million homes sold over the year. Home prices also rose 12.9% when compared to the previous year. This is because demand is outpacing supply, and the current market has been at its highest level of annual growth since 2006. It is higher than it was just before the housing bubble burst in 2007.
What Is The Market Condition Like Out There?
Right now, it is a sellers’ market, and for those who are looking to buy and flip, there is some potential for making quick cash as long as current market conditions hold. Of course, this means that acquiring the property will probably cost you more, but with the current rate of rising prices, the quicker you can turn the property around, the quicker you will have money in your bank account. In addition, many people are choosing to take advantage of low mortgage interest rates.
In Maryland, one realtor reports that it is common for sellers to get around 15 qualified purchase offers within three days of putting their house on the market. To cut down on competition, they are listing with a tight offer deadline. Market conditions favor cash buyers and those who have a sizeable down payment. Those who are approved for financing before they make the offer also have an advantage. In this competitive market, those that only have the 5% down are at a disadvantage and often lose out.
Will This Housing Market Trend Last?
With memories of 2007 still dancing in their heads, many people wonder if it is an excellent time to buy or if they should wait for another bubble to burst. For the short term, at least through the rest of 2021, many experts feel that this trend will continue and that prices will be driven higher. So, if you have a home you were thinking of selling, now is an excellent time to do so. However, if you are looking to buy a home, you will face stiff competition on properties of interest to you.
You make money when you buy low and sell high, but it is difficult to buy low in the current market conditions. So if you do happen to find a property that looks like a good bargain in terms of price, it is an excellent time to use caution and make sure that there is not a legitimate reason for the price drop.
This is especially true if the asking price is well below other houses in the neighborhood. For the average investor, this would signal extreme caution, but if you are an expert and can spot what the problems are, you might have stumbled onto a lucrative opportunity. Again, this is especially true if you can perform the repairs yourself.
A Word of Advice About Real Estate Investments
When it comes to whether this is an excellent time to buy real estate or whether you should wait out for a change in the market depends on your experience and your long-term plan for the property. It is certainly not a market for the weak at heart. If you decide to enter the market, make sure you know your maximum allowable offer before you place a bid. Also, make sure that you do not overpay on your home.
Fast and loose lending was the driving force behind the 2007 housing market crash. Lenders were allowing those with substandard credit scores and no money down to purchase homes they couldn’t afford. After the crisis, new rules were put in place, and the conditions that led to the crash do not exist today. This is not to say that a bubble burst could not happen, but it is not likely, at least to the degree that it occurred in 2007.
So, does this mean that the housing market is safe? One thing to consider about real estate investing is that it is regarded as a long-term investment. Therefore, you should always do your research and think about your investments long and hard before deciding to leap real estate investing in any market condition.