A Cooling Real Estate Market and Investing in Pre-foreclosures

A Cooling Real Estate Market and Investing in Pre-foreclosures

As the economic growth of any country will increase over time, the demand for the real estate market can also have a significant impact.  Many lenders have turned to mortgage products designed to lower monthly loan payments and to help borrowers authorize more readily for larger loan amounts, while others require little in the way of documentation during the approval procedure. 

These loans do make it easier for some individuals to get mortgages, but they also can raise the chance that some borrowers may end up in foreclosure. For the real estate market investor or home buyer, these market conditions represent a window of opportunity.

Real Estate Market and Investing

With the housing real estate market cooling and demand for mortgage loans shrinking, banks and other lenders are turning to nontraditional and sometimes riskier mortgages to bring in additional business and make up for their dropped off business.

As housing monetary value appreciation rates slow, more mortgages go into default. Foreclosure notices have edged up in recent months, providing yet Another sign of a cool down in the real estate market Worldwide. For example in San Diego County, CA. Banks and different lenders sent 1,266 letters of default to borrowers in the third quarter, a notification that gives homeowners 90 days to become current on payments before moving towards a foreclosure auction.

At the height of the real estate market boom, the double-digit rises in home equity meant customers could pull out monies from the increased home equity to bask in a lifestyle that they could really not afford. Flush with the capacity to tap into home equity loans, homeowners have pulled out cash to purchase new cars, furniture, vacations, and other luxuries. Another boost to their lifestyles was rendered when homeowners refinanced utilizing adjustable-rate mortgage loans that cut their monthly payments.

But now the circumstances are changing, in many areas of the country real estate market price levels are flattening out and even not rising in some real estate markets. With little or no increase in home equity, or even vanishing equity, homeowners could find themselves in a tight bind.

Other forces are also having an effect on the housing market: New federal laws regarding credit card payments have passed to increase the minimum payment compulsory on credit card debt. For many individuals that payment will now be twice what it has been in the past. And, as energy and fuel prices and health care costs continue to march upwards to new all-time highs. Growing numbers of individuals are in financial conditions where capital spending is exceeding the capital earned.

For the first-time real estate investor or seasoned veteran, the current market situations are a window of opportunity for those shopping to buy real estate property just before foreclosure. 

A growing number of homeowners have withdrawn all their equity (occasionally as much as 110% of their home’s value.) and now house values have turned down and they are upside down -where they owe more additional than they can sell the house for. 

Trapped in circumstances where they can’t pay their debts and they can’t find a buyer for their home, real estate investors who understand the default process can suggest a solution that offers the homeowner in default a way to escape from their mortgage payments and for the investor a method to secure a property in the process.

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