Realty Review

For many different reasons, most people are eyeing the real estate market right now for potential 2010 purchase. Some people simply want to move their family up to a larger home with less cost, while others are considering going into business flipping houses or taking on additional rental properties.

The year 2010 will bring about many changes in the real estate world. One of the questions you may want to think about is whether or not investing in real estate is a wise decision for you. Here are a few things to consider:

On one hand, this is the perfect time to make a purchase since the value and selling price of homes is set to rise in the future. This means you can buy a new home for your family without its value dropping a short while later. This also means you can pick up a cheap rental house and make higher profits in time, or buy cheap prices to flip for substantial profits.

With the economy still unstable, many more homeowners will find themselves unable to pay their mortgages. It is said that 1 out of every 4 homeowners owe more on their mortgage than their home is worth. With many people losing their jobs, their mortgages will go unpaid and their homes will be lost.

With hundreds of billions of dollars in adjustable rate mortgages set to recast next year, the new payments can end up being more than twice what their original monthly payments have been. This also will see more people losing their homes due to nonpayment of their mortgages.

Another consideration is the expiration of a critical federal program in March. This was a program to help homeowners that allowed the government to purchase debt and mortgage backed securities from Fannie Mae and Freddie Mac. It has kept mortgage rates lower, but when it expires you can expect to see mortgage rates rise back up. Rates could go from 4.88% to 6% easily.

The Department of Housing and Urban Development (HUD) is also considering some other big changes for the real estate market in the upcoming year which might make securing real estate more difficult in the future. For instance, the required credit score could be much higher, you may be required to put down a substantially larger down payment, and insurance premiums could skyrocket.

Finally, consider the value of the tax cuts currently being offered by the federal government. If you purchase your first home (the rules are lax on what \”first\” means) before July, you could receive up to $8,000 in tax breaks. If you decide to purchase a second property, you could receive up to $6,500 in tax breaks. Of course, you want to make sure you can afford your payments long term and not get sucked in by the temptation of this offer.

It is important to keep all of this in mind if you do purchase real estate in the upcoming year, but also be prepared for whatever may happen with the economy. Make sure that you are financially secure and that you can handle whatever changes may be coming in the next year as the economy fits to normalize once again.