Recs

2

Hurrah for Plunging Home Values

Every cloud has a silver lining, right? So when you read about plunging home and stock values and hear talk about a recession, remember that the current situation offers some profit potential to many of us.

For starters, remember that when the stock market swoons, it's bad news for those of us who planned to withdraw some of our money in the near future. If you had meant to sell off some of your nicely appreciated stock this year to put a down payment on a home, you're probably not too happy right now. But you know what? You shouldn't have had any short-term money in the market to begin with -- because as we've seen time and time again, anything can happen in the short run.

Meanwhile, falling prices for homes are bad news if you carry a mortgage and aim to sell your home soon. Some people, especially those who bought their homes via aggressive mortgages, may be in a situation where they owe more on their loan than their house is worth. If they try to sell now, they won't raise enough moolah to pay off the mortgage. Gulp.

So who profits here? Well, those of us who are looking to buy. The S&P/Case-Shiller national home-price index for the fourth quarter was down almost 9%, an unprecedented move in the index. Previous hot spots like Florida and California have seen even greater losses -- and they may continue. For sellers, that's terrible. But for buyers, lower housing prices mean lower down payments and mortgage payments. And better still, interest rates remain rather low, historically speaking.

Learn more in our Home Center and in these articles:

And by the way, if you already own all the real estate you want, you might still profit by investing in some real-estate-focused mutual funds. If past performance is any guide (and it isn't always), the Third Avenue Real Estate Value (FUND: TAREX  ) fund, with its five-year average annual gain of more than 17%, may rack up more gains after the real-estate slump eases up. Its top holdings currently include Brookfield Asset Management (NYSE: BAM  ) , ProLogis Trust (NYSE: PLD  ) , Vornado Realty Trust (NYSE: VNO  ) , and St. Joe (NYSE: JOE  ) .

Third Avenue Real Estate Value is a Motley Fool Champion Funds recommendation. For more market-beating fund recommendations, check out our mutual-fund newsletter free for 30 days.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Brookfield Asset Management is a Motley Fool Global Gains recommendation. The Motley Fool is Fools writing for Fools.


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Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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Related Tickers

12/22/2014 4:00 PM
BAM $49.30 Up +0.08 +0.16%
Brookfield Asset M… CAPS Rating: ****
JOE $18.15 Up +0.21 +1.17%
The St. Joe Compan… CAPS Rating: *
PLD $43.37 Up +0.87 +2.05%
ProLogis CAPS Rating: ***
TAREX $31.34 Up +0.13 +0.42%
THIRD AVENUE REAL… CAPS Rating: No stars
VNO $117.94 Up +1.98 +1.71%
Vornado Realty Tru… CAPS Rating: **

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