Is it true that houses are cheaper this time?

Question

House prices are cheaper now because of the global crisis? How true and less of how many ???

Ross Treakle · Answer

Prices are most definitely cheaper now then they were a few years back.  It used to be the case that an investor could make money by forced appreciation, which is now not the case unless you are a buy and hold investor.

It is exactly what John said, foreclosures are on the rise and the credit market has tightened up.  Both of these factors contribute to cheaper prices.

As an investor, you should always be buying below market to begin with but what you will find is that in many cases you are able to buy even cheaper than you could a few years ago.

There are great opportunities especially with REO's right now.  I prefer REO's because you do not have to deal directly with a homeowner in distress.  While it does feel good to help out homeowners facing tough times, I would rather build a relationship with a local bank and/or REO agent and get deal after deal after deal from a few sources then have to track down every single lead separately.

Jon Klaus · Answer

There are more foreclosures pushing prices down.  The banks that are taking back a record number of homes are in trouble and must liquidate.  This also means lower prices.  Borrowing standards are much tighter, so this too pushes prices down as there are fewer buyers with less money to spend.