In the world of investing, nothing ever stays the same. The rise and fall of the real estate market is proof of that fact. Before the economic recession, real estate was seen as one of the best investments anyone could make, but suddenly a crash in property prices made people fear the market. A serious error people made was to believe that housing prices would remain high even if the stock market crashed and the same holds true for commercial real estate.
In regards to the housing market, individuals bought the biggest house they could afford while others invested almost all their cash in various real estate opportunities. When the bubble burst, it ruined a lot of people and led to an overwhelming fear of real estate investing in general. This attitude is still prevalent today, even when experts suggest that there are signs pointing towards a market recovery.
As sure as bust follows a boom, the opposite is true. At the height of the market crash, properties were worth 50% of their original value; however, conditions have picked up significantly over the past year or two. Investing in real estate now is a great idea because we are already witnessing a modest increase in property values despite the fact that the nation’s economy as a whole is far from a full recovery. Nationwide, we are seeing evidence of a real estate property rises in many of the major cities hit hardest by the crash. For example in the last 12 months, property prices in Phoenix are up 26%, San Francisco has experienced a 17% rise, while Sacramento’s prices have risen by over 30%.
The cost of ownership is quite low at the moment and while real estate prices are rising, they are still far below the levels experienced a few years ago, which when combined with low interest rates, it means real bargains are still available. According to Bankrate, the average 30 year fixed mortgage rate stands at 3.57% as at April 2013 which means higher earners (those best suited to real estate investment) are ideal candidates for low mortgage rates.
Keep in mind that you must take advantage of the market as it stands because waiting for an economic improvement will ensure you miss out on the current mortgage rates. Interest costs will probably increase by 2-3% within 12 to 18 months which means you’ll have missed your opportunity. The most relevant reason for participating in real estate investment right now is that the majority of potential investors are still wary of the property market. As a result, there are an immense number of offices, warehouses, and houses available for affordable prices.
Reasonable ownership costs, the probability of a price increase, use as a hedge against inflation, and associated tax benefits suggests you should seriously consider adding real estate to your investment portfolio.
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