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Advantages and Disadvantages of Buying a Foreclosed Home in the Current Housing Climate



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By : Leticia Carvalho    99 or more times read
Now that the housing market is in shambles and home prices are at its lowest level, most homeowners think that today is the right time to venture into the real estate market business. Yes, buying a home, especially a foreclosed one, may seem to be a good investment right now.

But how about tomorrow? Will it still be a good investment if home prices continue to fall?
The current home prices have decreased to such a level that it is in line with the income of majority of homeowners.

Prices on residential properties ballooned artificially because of borrowers’ easy access to loans that offer affordable monthly payments, even for only one or two years. This has contributed to the increase in the number of homeowners facing the threat of foreclosure.

According to the Case-Shiller Home Price Index, home prices in August 2008 declined by 1 percent and 16.6 percent since August of last year. Interest rates for a 30-year fixed-rate mortgage are between 6 percent and 6.5 percent, which are still affordable.

For homeowners who have good credit standing and can offer a down payment, the current housing market condition and foreclosure rate represent an opportunity for them to purchase a home.

However, along with opportunities to buy foreclosed homes come the risks and uncertainties that may exacerbate housing problems and cause home prices to decline even further.

During its peak, the housing market saw construction of over 1.5 million houses. And with the current absorption number of nearly 1.6 million houses annually, it is expected that home prices will reach its lowest level in the second half of 2010.

It can never be denied that declining home prices is attributed to the increase in foreclosure rate. And this seems to be the right time to purchase a foreclosed property. But if the risks outweigh the benefits, why bother buying one.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.

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