A TV news segment this week showed hundreds of people filling up huge meeting rooms for a chance to bid on a bank foreclosure at an auction. The commentator said 85% of auction buyers are “end users,” ie, people who intend to live in the property, thus leaving a small percentage of buyers in the “investor” category.

Homes have become much more affordable for many prospective home owners and interest rates for mortgages are exceptionally low right now.

Does all of this auction excitement mean the U.S. housing market has bottomed?

According to the chart below…it’s probably WA-A-A-A-AY too soon to call a bottom in the housing market

Notice that the number of seriously delinquent loans was accelerating through the fourth quarter. What’s more, the S&P/Case-Shiller 20-City Composite Home Price Index for January fell 19 percent compared to the same month a year ago, reflecting an acceleration from the 18.6 percent year-over-year decline reported for December.

And the problem is likely to get worse …

Shadow housing inventory not even included in the numbers!

Some 700,000 homes across the country stand in what’s called a “shadow inventory.” These are houses that have been taken back by banks but not yet given to a real estate agent to sell.

Here’s another frightful factoid: U.S. home prices have never bottomed while unemployment is still rising. And as I showed you in reason #2 above, we haven’t seen the high tide in job losses yet.

According to financial analyst and journalist Sean Brodrick, “We won’t know we’ve hit bottom in the housing market until after the fact. And it will take months, maybe years, for the housing market to work off its problems.”

What’s a real estate investor to do?

I have 3 recommendations for investment opportunities:

• Focus on income producing commercial property that generates positive cash flow, instead of single family homes and condos. The types of commercial properties would include apartment buildings, commercial buildings for business use.

In this market you should likely shy away from retail and office buildings with so many businesses going out of business, unless you are in a real estate market that is stable or growing with new businesses coming into the area.

• Only look for “bargain-priced” properties that you can flip quickly. I would not recommend buying and holding with the prices of homes likely to continue to decline for the foreseeable future.

• Buy properties in “bargain towns.” There are real estate markets around the country that have not been as adversely affected by the housing bubble and businesses going out of business resulting in swelling job losses.

Typically, areas that are near college towns and have a diversified economy not dependent on one or two industries will be good areas to do your due diligence.

Expert real estate investing advice is a click away

For all the expert you need to find the right properties and strategies to invest in real estate in today’s market - even with good credit or cash - review the Real Estate Investing Section of the main website.

There are three investing guides that focus on:

1. Apartment building investing

2. Business-use commercial property investing and

3. Buying paper from the banks that are loaded with REOs.

Take a look at these recommendations first.

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