Before you put money into the red-hot real estate market, consider these issues:
Employment growth. The stronger the better, in terms of investing in residential real estate. Jobs are filled by people who need somewhere to live, so there will be a demand for housing. A similar positive sign is income growth within a region.
Artificial constraints on supply. In some areas, a lack of land or a politically imposed building moratorium will keep housing construction down, supporting the values of existing properties.
Inventory If more homes are staying on the market, houses aren’t selling as fast as they have been. Prices cuts are bound to result, as sellers face time pressures.
Financing patterns Interest-only loans are popular now. However, if people get in over their heads, they could be forced to sell their houses, flooding the market and lowering prices. So be wary of investing in areas where interest-only loans are widespread.
