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When will the real estate market bottom out?

One lesson is clear from the property forums this week and that is that there are always potential crooks out there and perhaps more are emerging with the signs that investors might becoming back into the markets.

The following screams out – 125% mortgage product in Spain. As a headline there are two immediate worries. First of all one lesson that should have come out of the current credit crisis is that borrowing more than a property is valued at is a foolish game at present.

Secondly, although Spain is still a very popular place for overseas property investors it has suffered a severe real estate crisis and most experts agree that property prices have not yet reached the bottom so buying in at present with this kind of deal does ring alarm bells.

Indeed when you follow the thread on the forum it emerges that this deal is probably just hot air. As one poster points out it sounds a bit like a Northern Rock type mortgage and we all know what happened to them.

The thread also reveals that there are some very good mortgage deals in Spain at present but they are being offered by Spanish banks on property they own and want to shift and they are only available to Spanish residents.

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It turns out this offer comes from a Dutch website and the company is being investigated for fraud. It is a sign, however, of the need to be careful when senting a bargain. In the past too many property investors have blundered into deals with rose tinted spectacles. Such is the eagerness to find a bargain that once again common sense is too easily tossed aside.

In these financially challenged times finding the finance to meet staged payments is proving a nightmare for many property investors. So it is always helpful to find practical advice on the property forums in between the moans and the groans.

One such thread on the forum gives an idea of how to persuade a developer to re-schedule payments. The suggestions range from ask nicely to getting together with other investors and use people power to get a change.

It would also appear that some real estate brokers in the United Arab Emirates, for example, are willing to negotiate with developers on behalf of property investors. One says that he achieved 20% now and nothing else until completion.

Another issue at present it figures showing that property prices and sales are increasing, even if the amounts are tiny as in the 0.9% reported by Nationwide in the UK. Reading the forums it is clear that these miniscule amounts are being declared as a sign that the property markets are bottoming out despite warnings from experts that they could just be a blip.

This is happening in the markets that have been badly affected by the economic downturn such as the UK, US and Spain. In the US there is much discussion on the forum about the fact that in some areas the number of transactions is rising.

One foreclosure specialists says that market analysts are seizing upon figures showing that home sales soared nationwide in February as a sign that the bottom has come to the US distressed property market but sales also rose in December and September without a bottom being reached.

It comes to the classic question for property investors – buy now or wait? One answer is to buy now if you are buying a property for investment as the bottom cannot be that far off. One poster points out that if you buy now and rent out then the property is providing you with and income even if the valuation drops slightly.

The other attitude is that statistics can be spun to prove a point. Some believe that a rise in sales from one month to the next means very little, least of all a sign that the bottom of the market is being reached.

Others point out that with a huge backlog of foreclosures in the pipeline the bottom of the market in severely hit areas like Florida and Las Vegas could be some time away yet.

So how do you identify the bottom of the market? That question is posed on the site. The answer – well there isn't really one. As this post shows any answer has to be based on assumptions. One suggestion is that property prices will stay at the bottom for some time and that there will not be a sudden upward swing in prices.

'Don't get panicked by the bulls who are still telling you that if you don't jump and grab today, you will miss the bus. The bus is still to arrive at the terminus and when it does, it will stick around for quite a while so you can get in at leisure when you have ensured financial strength,' seems an appropriate piece of advice for the current climate.