Real Estate Profit from Recession

Up until 2008, many areas experienced a housing market boom. House price had risen steadily (and sometimes astronomically) for as long as most of us could remember. A couple of consequences of this were that investors were increasingly looking at real estate as a way of making a profit, but many first time buyers were finding it increasingly difficult to get onto the first rung of the property ladder.

With the arrival of the credit crunch-fuelled global recession, the old certainty of continued rises in the value of property were swept away and most areas have experienced a sharp decline in property prices. Market commentators said it was a case of the market correcting itself. In other words, house prices had become unrealistically high and weren’t properly reflective of the supply and demand.

Existing property owners have seen a fall in the value of their homes and, in some cases, mortgage holders have found themselves in negative equity; where the value of their home is less than the outstanding amount of their mortgage.

It’s not all been bad news however. The fall in prices has meant that some people who were previously unable to afford a home can now achieve this dream. The caveat on this is that such opportunities depend upon a person’s ability to obtain a mortgage, at a time when lenders have tightened their lending criteria. However, those who have saved up a large down payment are in a particularly strong position.

As well as the fact that prices are lower than in recent years, the number of repossessions has gone up. Whilst this is very sad for those involved, it has also opened doors for those who are looking for a bargain. The banks who find themselves lumbered with a repossessed house are usually keen to secure a quick sale and it can enable investors to nab a good quality property at bargain basement prices.

The fall in property prices may encourage professional real estate investors and individuals that they can secure a profit from the property at a future point. However, caution needs to be exercised as commentators are still uncertain over how long the current recession will last for and whether property prices will rebound to their previous levels any time soon. The likelihood is that prices will go above previous levels but the time-frame for realizing a profit may become much longer than in previous decades. For most individuals, therefore, the key thing is to ensure that you are buying a home that you can comfortably afford and where you will be happy to reside for the medium term.