Is there any Profit to be Made from the Recent Real Estate Slump

At this point in time, the recent real estate slump has resulted in a continuing rise in home foreclosures and short sales. With this increase, there is an interest in making profits by purchasing foreclosure homes. Let us look at some options that may arise due to foreclosures. When faced with such a situation, a short sale can make it possible to tread murky waters and come out smelling of roses. In such a situation, the buyer agrees to purchase property directly from the lender for a discount instead of buying from a seller. Thus, the lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy.

Let us look at some key benefits here. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the benefit is to avoid having a foreclosure on his/her credit history. A short sale is typically faster and less expensive than a foreclosure. The homeowner wins by getting out of a difficult financial situation through a clean transaction and a salvaged credit score. The lender wins by avoiding costly foreclosure proceedings or re-taking ownership of the property until it sells. The buyer wins by getting a nice property at a good market value.

Let us look at the economy now. Reports on the current state of the economy are better than expected and this could be good news for housing (both foreclosures and the home resale market). A close look at recent figures indicates an uptick in the home resale market. The National Association of Realtors (NAR) reported that the median price of home sales rose in march to $200,700 up from $195,600 in february. This points to an upward trend in home sales which could be due to the availability of mortgage money at reasonable rates. The 30-year fixed-rate mortgage stands at 6.04% and 15-year mortgage at 5.6%.

Resales were up in many parts of the country. In the north-east, sales were up by 2.3% and in the west, they were up by 2.2%. One area that has done reasonably well is condominium sales which saw a 3.6% jump, on top of a 3.7% increase the previous month.

The Federal Reserve announced a quarter point rate cut which results in lower borrowing rates and typically boosts consumer spending. In addition, the tax refund and economic stimulus checks can create an environment of increased spending by the common man. All this results in more money to spend and some of this wealth can fuel the housing market. In short, buyers who see opportunities can buy and smart sellers can sell.