Real Estate: More Shingles are Shaking Loose for Investors

An article in yesterday's Miami Herald provided more evidence that to be successful in real estate today, you have to keep your eye on a number of trends at the same time:  

• Slowing construction. Construction of new apartments and homes dropped by 2.1 percent in May to 1.474 million units -  24.2 percent below the level of a year ago.
• A lingering surplus of available new homes. Thousands of new homes are unsold and homebuilders are offering new sales incentives to buyers, including kitchen upgrades and free decks.
• High interest rates. Freddie Mac's national survey of interest rates for 30-year mortgages hit an 11-month high of 6.74 percent last week.

And then on the same day, a Reuters article reported one more big aftershock from the subprime lending crisis: 

• H&R Block, which is selling its money-losing subprime mortgage unit to Cerberus Capital Management, saw the takeover value of the unit fall to $300 million - a drop of 21 percent since the deal was announced on April 20^th.

It is an odd combination of trends - a housing glut, rising interest rates and a widening foreclosure crisis. But through it all, fundamental principles of real estate investing still apply:

• Develop realistic objectives as an investor.  
• Know the actual market value of the properties you buy  so you do not overspend on the purchase price or on renovations.
• Know everthing you can about current mortgages (and other borrowing options) so you know the real cost of any deal you put together.

 So, how should you invest in this uncertain market? The only certainty is that the more you know, the more you stand to make - and the more you can minimize your risk.

You can't hide from the trends. You need to master them.