According to an August 24, 2010 article published by NAR (National Association of Realtors) existing home sales have dropped significantly since the expiration of the federal housing tax credit. An interesting fact in the article, quotes as, "sales are at the lowest level since the total existing home sales series launched in 1999, and single family sales - accounting for the bulk of transactions - are at the lowest level since may of 1995."
On the flip side, home-starts are down year over year from July 2009 (note that data is usually published in arrears). Housing starts being down allows for the current inventory to be absorbed quicker, which reduces the supply on the market. In terms of the basics of supply and demand, as the current inventory is absorbed (purchased and removed from the market) and supply is constrained, prices rise.
The mix of reduced home sales keeping inventory on the market and reduced home-starts (construction of new homes) allows for an interesting dynamic in the marketplace. Prices should remain at low levels due to the reduced buying activity but even the low levels of transactions will begin to "eat away" at the inventory. In that case, home sales will natural flow towards it's equilibrium (when supply and demand meet) price; in this case increasing.
Going back to the NAR article the NAR President Vickie Golder states, "mortgage interest rates are at record lows, home prices have firmed and there is a good selection of property in most areas, so buyers with good jobs and favorable credit ratings find themselves in a fortunate position."
In my opinion, now is the time to pick up your first residence or your first (or additional rental property) in order to take advantage of low prices and low mortgage interest rates.
* check back soon for a discussion on the tax benefits of owning investment properties. A breakdown of depreciation, mortgage interest tax deductions and their effect on before tax rates of return will show you why investment properties are more then just owning property. Also, I will try to get a paragraph on passive real estate investment losses and their deduction to you income tax.
To get a better understanding of the fundamentals of real estate investing you can purchase some "entry-level" texts from Amazon.com. My suggestion would be to go with books from respected sources, publishers and authors. This one is suggested by me personally: The wall street journal. complete real estate investing guide, by David Crook.
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