A curious thing is happening with home sales. While prices are on the decline, sales of existing homes are actually rising. In the six months ending on December 31, 2010, there was a 6 percent drop in home prices overall. As of February 2011, sales of existing homes had climbed for three months in a row. Although the numbers seem odd, there is a perfectly good reason for them.
In 2010, 26 percent of the homes that were sold either happened in foreclosure or immediately preceding an imminent foreclosure in short sales deals. This trend has opened the way for many investors to specialize in distressed mortgages and enjoy an amazing amount of activity in their RE business. The result is a larger number of sales overall for existing homes.
With the lower prices for homes during this same period, real estate investors have had the opportunity to buy in at an inexpensive price and gain a higher profit. In fact, values for homes in foreclosure have been at around 15 percent less than normal. The REO properties, those which the lender had already acquired through a completion of the foreclosure process, sold at a much deeper discount of about 36 percent less than normal.
Aside from the investors who are after a quick purchase and turnaround, there are others who buy these artificially inexpensive properties in order to rent them out. They plan to hold on to the properties while the market is still down, and sell the properties later, when the market makes a full rebound. Both quick sales and long term investing are possible money makers in this housing market.
Investors are becoming a larger and larger portion of the home-buying population. In 2009, investors accounted for about 17 percent of all homes bought, and in 2010 that percentage had increased to 23 percent. The opportunities are there for real estate investors if they only look.
One thing this does mean for investors, though, is that they have to keep their eyes on the ball. There may be an abundance of opportunities in the housing market due to the many foreclosures and distressed mortgages these days, but there is plenty of competition for those opportunities. An individual who wants to make money on these deals must seek them out and work them before others snap them up first.
It may not be so surprising that prices are down and sales are up. After all, when something is inexpensive it is easier to sell. On the other hand, some of the distressed mortgage sales are deals only an investor could love. They may require a cash outlay, quick action and strong negotiations. The wise investor will use his resources to get the business and make the profits.