• Home prices are not declining as quickly.  In recent months, they’ve either remained steady, gone up a little, or seen only a slight drop as opposed to the common major falls of the past.  This is a good sign that consumers are purchasing homes again, rolling money back into the market.
• At the same time, home prices have not witnessed a huge increase.  This side is even better for the consumer; it has become easier for many people to afford homes.  While rising unemployment rates threaten the affordability from the other side (and keep the possibility of foreclosures near), the fact that prices have remained relatively steady offer a positive promise for the real estate future.
• With prices low, the people that can afford to buy homes are actually buying them.  One big help has been the first-time homebuyer tax credit.  People that are buying their first home can receive up to an $8000 tax credit that does not have to be repaid.  If you are in the market for a new home (excuse the pun), do not forget to take advantage of this!  It’s only available through December 1, 2009.
• Even though credit requirements have become stricter due to the high number of recent foreclosures, interest rates have remained low.  This equates to more affordable loans for new homebuyers, as well as a great opportunity for many people to refinance their current homes.
• Foreclosures are still common.  This may seem like an oxymoron; yes, foreclosures are a negative occurrence for all involved parties.  However, foreclosures mean even lower home prices, opening up the possibility of homeownership for even more people.  These properties account for about 1/3 of home sales.  Without the low prices that come with them, home sales would not be rising.  Of course, low foreclosures would be a better sign of recovery, but for now, the fact that it equals a low price and a home sale stands to push the market in the right overall direction.

These indicators may be only small glimmers of hope that the recession will end, but a positive outlook is always beneficial.  If these signs can become a solid base to build upon, perhaps we can eliminate the words “slump” and “downturn” from our vocabulary.

A foreclosed home presents a great opportunity.  The previous owner was unfortunately unable to keep up on the mortgage, leaving it available for you at a considerably lower cost.  You have three different windows of time to attempt to purchase a foreclosed home, and depending on your level of homeownership experience and any advisors you have available to help you, one option will work better than the other two for you.

Pre-Foreclosure

Pre-foreclosure may offer the best chance for the greatest price discount, but it’s also the toughest time to get your offer noticed and accepted.  In this case, you would be dealing directly with the current owner, attempting to help them ease through the foreclosure process with a buyer on board and hang onto the equity that has been built into the home.

The problem is that the owner is experiencing a rough financial and emotional time—it’s unlikely they’ll want to talk to yet another person that wants to take their home away from them.  They may be desperately searching for a way to keep the home, or simply too angry and frustrated to be bothered by you.

If you do manage to get an offer in, know that you’ll be competing with experienced investors that typically buy foreclosed homes in order to fix them up and resell them for a profit.  If you’ve done all your research and have the right help, don’t be afraid to hop in.  If you’re buying your first home or are even a little unsure of your negotiating skills, you should stay away from this period.

Auction

Inexperienced homeowners may also want to avoid auction.  The main issue here is that you’re taking a big risk.  You need to make sure you are aware of the home’s true value, and that can be tough—you’re not allowed to inspect the home before you buy it.  You must pay the full price in cash, and you accept the home in as-is condition along with any judgments or liens currently held on it.

Again, if your research determines that you can get the best price on a particular home during auction, you’re encouraged to do so.  If you’re not already fully experienced with foreclosures, make sure you consult with an agent who can guide you through the process.

After Foreclosure

This can be the best option for first-time homebuyers; the process is the most similar to buying a regular home.  The price will still be discounted, and you may even have some wiggle room for negotiation yet since the bank is the new owner and it is hoping to sell the home as quickly as possible.  You can mortgage the house now through the bank, and all of those nasty liens and judgments have been removed.  Be aware of the need for some home repairs, though.  Generally, if the previous homeowners were unable to meet their monthly payments, chances are high that necessary repairs were neglected due to financial reasons.

On a final note, be sure to dig deep to find the right foreclosed home.  If you’re a first-time homebuyer scared away from pre-foreclosure and auction purchases, you may want to search for hidden foreclosures.  A perfect example is a new home that was in the process of being built (not necessarily by the home’s intended owner), may or may not have been fully completed before the loan money was spent, and there weren’t any buyers.  These may not be listed as foreclosures, but they can be found and purchased at discounted prices just to get them off the market.

Rural real estate seems to be a hot trend for investors, but is it really a good investment?

The thought behind buying rural real estate seems to be there is only so much land, and therefore the value can only go up in price. By buying a quiet property out in the middle of nowhere, you can live peacefully and possibly earn a nice return on your dollar if suburbia expands.

Unfortunately it seems many people are duped into buying rural land and end up stuck with a piece of property that is virtually worthless. Take Paula, who shared her biggest financial mistake. Paula and her husband were newlyweds invited to enjoy a nice vacation and take a look at some land in Colorado. The hosts got them excited about the opportunity to make money as a “soon to be ski resorts” was in the works, and they took a gamble and bought the rural real estate. It’s now 10 years later, and they are still trying to pay off the land they can’t even build on.

There are countless other stories just like this where couples go on a vacation and find a nice quiet lot with a for sale sign and think how wonderful it would be to get away from the busy life. Only after they buy their rural piece of land do they find out they over paid for property that is essentially worthless.

If you are going to buy rural land as an investment, don’t do it on a weekend binge, and make sure you do your own due diligence. There are certain things that you have to take into consideration that may not even cross the suburbanite’s mind, such as:

• Is there a well for water?
• Is the property accessible during the spring when it rains, or does the land around the property flood?
• Does it have public access to sewage, septic, electricity and roads?
• Will the public school bus come out there?
• Is the land suitable to build on, or is the ground too soft?
• What will it cost to get the phone company to come out there, and is there any way to get internet access?
• What kind of wildlife will you have to ward off?
• Are the boundaries clearly defined?

If you think you are getting a great deal on an inexpensive piece of rural real estate, check with the city on the items listed above. Generally speaking, the farther away you are from civilization, the more expensive it will be to build and have these services brought out to your property. There’s a good chance your great deal might have been someone else’s headache.

Millionaire Money Habit: With any kind of investment you make, it is critical that you do your own due diligence and fully understand what you are getting into. Don’t buy something with your hard-earned money on emotion. Take your time, sleep on it and make sure everything checks out. “Opportunities of a lifetime” can end up being your biggest nightmare.

For someone who has some extra cash they are anxious to invest, it’s tough to find some safe ground. Anywhere you look the housing slump and mortgage meltdown has affected investment returns, whether it be CDs, international investments, investment properties or the US stock market. Where is an investor to find a safe haven?

If you have the guts, there are some fantastic opportunities in both the housing and stock market. According to Money Magazine, over the next 2.5 years $233 billion in home values could be lost and an estimated 3.5 million homeowners will enter default on their mortgages. As a buyer in this market, this puts you at the upper hand to negotiate prices and pick up property on the cheap. On the other hand, price-to-earning ratios and other indicators suggest that stocks are also very cheap and will pay handsome returns to the long-term investor who can ignore the short-term whipsaws.

So What’s the Better Move – Investment Property or Stocks?

According to a 2004 Forbes.com article, real estate has surged 56% from 1999 to 2004 where the S&P 500 sank 6% during the same time period. But over the longer term, the S&P 500 grew 1,000% between 1980 and 2004, where home values only grew 247%. CNN Money also reported that stocks are the better deal for the long-term investor, with a 13.4% annual return in the S&P 500 versus an 8.6% average annual return in home appreciation between 1978 and 2004.

But there’s more to consider than just the return on investment. Let’s compare the pros and cons of investing in real estate versus the stock market:

Real Estate Pros:

• Buyer has greater ability to negotiate price and bid on foreclosures
• Borrowing money to invest is relatively easy and amplifies returns
• Rents go towards equity in the house and can provide additional cash flow
• Appreciation in property value produces additional equity
• Greater tax benefits on capital gains
• You can borrow against your home equity

Real Estate Cons:

• Hunting for the right property can be rather time consuming
• Land lording can create headaches
• Vacant properties, maintenance and repairs reduce profits
• High purchase costs/fees/expenses
• Housing Prices can continue to decline

Stock Market Pros:

• Buying an index fund involves minimal effort
• Little to no account maintenance. Just buy and hold
• Minimal purchasing costs/fees/expenses
• More liquid than real estate. You can sell and get your money out quickly
• Diversification

Stock Market Cons:

• Day-to-day ups and downs can have a psychological toll
• Borrowing money to invest is more complicated. Buying on margin is highly risky
• Volatility: Stocks can see dramatic movements that gain and lose money in relatively short periods of time.
• No tangible assets

While the current economic conditions are offering opportunities to purchase investments that can provide substantial long-term returns, you need to decide which option is most appropriate for your situation, ability, risk tolerance and overall investment strategy. If you are currently heavy on equities, consider adding some investment property to your portfolio. If you are just building up your nest egg, buying an index fund may be ideal in order to create a foundation of core, diversified holdings.

Millionaire Money Habit: Taking advantage of buying opportunities means having the guts to purchase investments that you see value in while others are apprehensive about them. Figure out the investment vehicle that is appropriate for you, and do your homework. You will certainly find some bargains during these times of panic and uncertainty. -RT

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