Double-dip In Home Prices Shouldn’t Scare Investors

An article written by a real estate broker and investor with more than 20 properties in several states takes a look at the probability of a double-dip in home prices and the fact that this shouldn’t bother real estate investors. The article is of more interest because this investor resides in Las Vegas, NV, arguably the hardest hit area in the country in the housing crisis.

Called the “foreclosure capital of the U.S.,” this agent has been one of the top five busiest buyer agents in the area for several quarters. His clients are buying homes, and they’re buying them in the worst market in the country. The term “double-dip” may not accurately describe the price action over the next year or so in Las Vegas, or in the rest of the country, but it’s close. More likely will be a gradual slippage in small increments.

The example cited is that home prices there have dropped 50% - 70% since 2007, but the rate of decline in the last year has been about 1% per month. So, a $100,000 home will lose about $6000 in value over the next six months. However, right now, interest rates are at historic lows, and a rise in rates can wipe out a $6000 discount in price in just a few years of mortgage payments. As the economy sees improvement, rates will rise.

Then, if you’re rental investing, there’s the lost income for six months to consider as well. Combining the payment increase with lost income, you’ve probably knocked a chunk off of that $6000 potential savings. The better approach, and one that’s working for his investor buyer clients, is to take advantage of the depressed mood of individual sellers or the overload of foreclosures at the banks and make lower offers. Take that $6000 discount on the front end … or more.