Foreclosures In 2010

Many people think we have survived the worst of the economic recession

, and we are operating in an increasingly stable real estate market thats on the mend. It seems more likely, however, that 2010 will actually be the peak of the foreclosure cycle, with up to four million newly-foreclosed homes. But what about tax credits, and the increasing number of sales recently? Well, theyre not all theyre cracked up to be.

Tax credits appear at the surface to be helping drive the real estate market right now, but in fact the total number of sales is still decreasing from a few years ago. What these credits are actually doing is expediting the sales that were already taking place (and probably would have taken place one way or another anyway), rather than increasing the number or breadth of transactions occurring. Eventually, the tax credits will run out, and we will be right back where we were a year agoexcept with more unqualified home-owners.

Further, interest rates on mortgage loans from the bank are increasing in 2010, to a standard of about 6%. Loans are very difficult to acquire these days, and very expensive if utilized. Whats more, its apparent that banksunable to sell their real property at reasonably profitable rates (or at least minimally costly rates)are withholding a great deal of inventory. This becomes a serious problem down the road, when they release that inventory, flooding the market and dramatically reducing overall sale prices in the process. Combine all these factorsexpensive loans, tax credits ending, inventory increasingand it would seem we are going to see even more foreclosures in the next year or two.

The good news is, if you have the capital funding to do so, more and more foreclosures mean greater desperation on the part of sellers and lenders, and better opportunities for buyers. Its going to continue to be a buyers market, to be sure. With the number of foreclosures, discounts, and short sales, there is no shortage of ways to find a good deal. But be forewarned: its a good time to buy, but a terrible time to sell. If you can afford it, its a perfect opportunity to buy-and-hold an investment property until the market climate warms up to sellers.

Tell us what you think. J

by: Jay Redding

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