Housing Inventory Drops Again - The Market Continues To Improve
June 10, 2009
A number of news outlets are reporting today that housing inventory, which is the amount of homes that are for sale, dropped 3.9% this month. In some areas of the country, housing inventory is actually returning to almost normal levels: of course in others, things are very much out of kilter.
This ties in very much with our data that we recently showed in the Tampa market where cash buyers where going turbo. See: Tampa Cash Buyers Fuel Local Market. As market begin to return to normal, we are going to see lots of mixed signals (some good, some bad).
While we are not predicting an INSTANT market rebound, we are seeing consistent pieces of information that this market is trying to turn.
See Wall Street Journal Article On Housing Inventory
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=2dc6a8b1-d15f-4521-8833-e307e0747a54)
Professional Cash Buyers Are Buying - Are You?
June 2, 2009
As we continue our series of blog posts about the change in real estate markets, we will now show a little known “secret”. What the average Joe is doing, and what the professionals are doing, are 180 degrees apart. Again, we will use Tampa as our example but what we show is happening in many places across the USA.
So What Is Joe Doing?
Referring to the typical home buyer as the “average Joe”, let’s see what is happening. What everybody “knows” in the market is that times are tough and RETAIL prices are dropping. Referring to the figure below, we see that this is true in every submarket in Tampa.
Chart Shows 12 Months Of Data For Various Tampa Submarkets
NOTE: This is RETAIL pricing. Prices paid by investors is RISING.
So, with this happening, Joe still believes now is not a good time to buy. Let’s also look at the number of mortgages being written but let’s go all the way back to 2005 as we started coming off the boom in Tampa. Here is what those charts look like for conventional, FHA, and VA financing.
Clearly, Joe is still on the sidelines.
What Is Sue The Professional Doing?
As mentioned in a previous blog post, there is now BIDDING WARS between professionals when a house goes on the market priced right. Let’s see if we can really QUANTIFY that. One very good measure of professional activity is CASH purchases. Typically pro’s move in with very low (or zero) financing so if we look at the number of cash purchases, it give us some indication as to the direction of pro’s and knowledgeable individuals. We can also verify by being in the market that this is EXACTLY what is really happening.
Referring to the figure below, we see that Sue was not buying in 2005 when Joe was buying everything in sight. We also see that now Sue, the Cash Buyer, is now buying while Joe is bailing. The typical example of the pro’s doing EXACTLY OPPOSITE what most people do.
Just for comparison purposes, let’s now put conventional financing and cash on the same chart.
NOTICE THAT THERE IS NOW MORE CASH BUYS THAN FINANCED!!! If that does not tell you something interesting about the way the pro’s think vs Joe.
The Cash Buying Pro Is Now A Huge Percentage
A natural question to then ask is what percentage of sales is cash now, and in the past. This is shown in the chart below:
From this chart, we can see that cash buyers are now nearly 40% of the Tampa Bay market. If you ever wanted an inside look at what the “pros” are doing in a market, this shows you.
Predictions For The Future
While we don’t have a crystal ball either, let’s see what predictions that we might be able to draw from this information.
- Cash buyers & pro’s are buying everything in sight right now;
- Conventional buyers still see “gloom & doom”;
- Inventory will be absorbed by the professionals given rents versus prices;
- At some point (we predict 6-12 months), Joe will wake up and then realize they are about to miss a golden buying opportunity;
- Once a significant number of Joe’s start to “get it”, then prices begin to rise again as they scramble to buy homes before prices “rise too much”.
The joys of a real estate cycle……. it is just too predictable.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=0a5051a1-0bb4-46a5-b753-dadc1bc90312)
Poof - An Instant Housing Fix?
April 3, 2009
Regardless if you are bullish or bearish on this market, what if something was planned that could radically change the real estate market…… almost overnight.
On April 1st, we offered a poll to determine the percentage of people that are bearish on this market and those that are bullish. The chart below shows those results as of the time this article was written.
Click Here To Register Your Poll Vote
Out of the people that participated in the poll, 21 indicated that they were bearish, while the majority indicated that they were bullish. Unfortunately, in my opinion, there is no right or wrong answer…… you simply have to interact with the market based on your beliefs.
One of the comments we received indicated that the person believed that the “real bottom” was 2012 - 2013. Unfortunately, none of us will know until 2014 if that is true. For that person, with their beliefs, probably the right strategy for them is waiting until that date….. it doesn’t mean that their approach is right (or wrong), but at least it lines up with their personal beliefs.
But What If It Changed With The Stroke Of A Pen?
As a real estate investor, one of the difficulties that we face is that market conditions change much faster than we can react. For example, many people were absolutely shocked at the rapidity that the real estate market stopped selling in mid 2005.
Now, let’s consider another potential event that could also have a major impact: the Making Home Affordable (MFA) Initiative. You can learn more here. Under this initiative, some of the 3 to 4 million homeowners eligible for loan modifications could see interest rates as low as 2 percent.
I wonder what this could do to the current “conventional wisdom” prevalent right now with many professional real estate players. Their view simplified is that:
- We are at the beginning of a wave of adjustable rate mortgage (ARM) Recasts;
- When these recast, especially option ARMs, tons more inventory will flood the market;
- This inventory will likely be in place for years to come.
But what if, with a pen stroke, that picture changes and now more people can stay in their home. In turn, this means that we rapidly start to work through existing inventory, which then decreases supply. Now, the building industry comes out of hiding, hires more people which then improves jobs, which increases demand, etc., etc.
PLEASE DON’T MISUNDERSTAND. I am not predicting the above. Most of the big money investors I know gave up on “predicting” years ago. They make decisions based on the real data in front of them TODAY and when they see a deal that makes sense TODAY, and has a high probability of making sense TOMORROW, then they act.
Real Estate Investor Sentiment: The Bear & Bull Battle
April 1, 2009
A couple of weeks ago, we hosted an educational event for the REO & foreclosure world with several hundred people from around the country on the line.
We thought it would be interesting to see what the investor sentiment was 
given all the gloom & doom on the news. We asked people how they were feeling about the real estate investment market.
Their choices where:
- I am bullish in this market and want to buy properties;
- I am bearish in this market;
- I am undecided
About 30 seconds after launching the poll, I was ready to fall out of my chair. Well over 70% of the people responding were BULLISH. Another 20%+ were undecided, and just a few percent where bearish.
Wow! I was completely surprised with that result. Given the news that exists out there today, I would have predicted a 3 way split….. Oh well, so what do I know.
As we launch NoBullRE.com, we thought it would be fun to do a similar poll here amongst the readers and let you see the results. I know people are reluctant to do anything on the web but this is TRULY ANNONOMOUS and is really for everybody’s benefit.
Ok, I know it’s April Fool’s day but if you will, please vote how you actually feel so that everybody can use these results.
Loading ...Vote To See Current Poll Results
Also, we would love to hear from you below and expound upon your thoughts and reasons.
San Francisco Area Sells 5,000 To Investors & Home Buyers
March 31, 2009
The market is totally dead, right?
Wrong! Would you believe that about 5,000 homes are selling MONTHLY in the bay area right now. Does not sound like the market is totally dead to me.
One of the interesting stats is that most of these homes sales are going to one of two categories of people:
- Investors; or
- First Time Home Buyers.
Let’s look at the first time home buyers first. One of the things that has happened in the Bay area is the ability to use FHA financing for first time buyers. Previously, the price points made this impossible but today, the FHA limit goes all the way to $729,250. Personally I believe that is a bit ridiculous but that is besides the point. So, with FHA financing, the buyer can put little money down and get into a fantastic deal.
The price points have changed dramatically as well in the area. A couple of years ago, less than 10% of the homes in the area sold for under $300K…… Today, it is over 51%.
Investors are also finding good deals. A recent article in the San Francisco Chronicle described how a real estate agent turned a quick $77,600 profit by buying a house with cash and the reselling. While most investors are buying, then renting, then planning to sell in a few years, there is still a few flip type opportunities that exist.
This Is A Link To The Chronicle Article
Florida Existing Homes Sales Up —- Again
March 29, 2009
There is a interesting trend starting to develop in Florida with existing homes sales now up for 6 straight months on a year over year basis.
Existing home sales rose 20 percent last month, with a total of 9,858 homes sold statewide compared to 8,181 homes sold in February 2008, according to FAR. February’s statewide existing home sales were 16.7 percent higher than January’s statewide sales.
You have to realize thought that many, many of these sales are coming from discounted sales. According to the Florida Association of Realtors,
Florida’s median sales price for existing homes last month was $141,900; a year ago, it was $199,300 for a 29 percent decrease. Industry analysts with the National Association of Realtors® (NAR) report a significant downward distortion in the current median price due to many discounted sales, including a large number of foreclosures.
From our perspective however, anything that reduces total inventory on the market is definitely a good sign.
Click this LINK to get a good chart of how each of the Metropolitan Statistical Areas (MSAs) did across the state.
Some Positive Signs For The Housing Market?
March 27, 2009
Two pieces of data have been reported recently that actually give a glimmer of hope for the battered housing market.
- New residential building permits ticked up 3% from January to February; and
- Sales of New, single family homes increased by 47%
While this is a long way from a rip roaring “Buy” signal, it is an encouraging sign for a change.
According to the Washington Post:
The number of newly issued residential building permits, which offers a glimpse of construction activity in coming months, ticked up 3 percent in February from January. Existing-home sales were up 5.1 percent, according to industry data released this week. And yesterday, government data showed that sales of new single-family homes increased 4.7 percent, the first increase in that market in seven months.
“Between the new and existing-home figures, we have seen a little bit of a pulse showing up in a patient that was thought to be terminal,” said Mike Larson, a housing analyst at Weiss Research.
Of course, most of what happens in housing is going to be directly tied to employment/layoffs caused by the economy. All of us are simply waiting to see how that plays out.
Get The Washington Post Article
291,000 Foreclosures in Feb. Creates Window Of Opportunity
March 25, 2009
Realty Trac has reported that there where another 291 thousand foreclosures reported in February alone. And this is despite the government actions to date.
While this is not great news for homeowners, it does present some interesting opportunities for investors.
NBC put together a well written piece that is worth visiting.
SYNOPSIS
The growing inventory of distressed homes on the market may be sending shock waves through the economy, but it’s also giving investors a wider window of opportunity.
Despite federal initiatives to stem the rising tide of foreclosures, some 291,000 foreclosure filings were reported in February, the third highest monthly total since RealtyTrac began following the data in 2005. Such filings include default notices, auction sale notices and bank repossessions.
Over the last three years, more than 4 million U.S. homes have been sent into foreclosure.
Whether you’re an investor looking to purchase a rental property, or a homeowner who’s ready to retire and move someplace more affordable, the price of foreclosed properties right now is right,” says Debra March, executive director of the Lied Institute for Real Estate Studies at the University of Nevada Las Vegas, the nation’s leading state for foreclosures.
Buyer’s Flocking To Cheap Foreclosures At Auction
March 23, 2009
In Glendale & Phoenix, buyers have been grabbing up some incredible deals by attending foreclosure actions. As reported:
“A Glendale home that sold less than two years ago for $259,000 sold again three months ago for $113,000. A Phoenix home that fetched $190,000 two years ago just went for $45,900. A Queen Creek home sold for nearly $275,000 when it was built in 2005. Last month’s price: $78,000.”
While this makes for great journalism, one thing that we encourage our club members to remember is
WHO CARES WHAT IT SOLD FOR TWO YEARS AGO.
That is totally irrelevant information at this stage and the only thing that counts is current market information.
Before entering into any such transaction, make sure you know the critical pieces of information:
- Price relative to current market value;
- Cost to repair;
- All issues related to title; &
- Rental amounts (even if you don’t plan to rent);
- Your plan for exit
In these crazy days of real estate, make sure you don’t get caught up in the excitement but instead, know your plan and stick to it.
Property Appraisals: Declining Market Adjustment
March 20, 2009
California is considered a “declining market” by lenders, the secondary market, and appraisers alike. Appraisers have been instructed to adjust the “comparable sales”, on a Uniform Residential Appraisal Report (Form 1004), by 1.5% per month. What this means is that the appraiser will use an exact model match (same size, floor plan, and location in the subdivision) from December, and lower the price by 3%, for a current appraisal. For example, if the property sold in December for $300,000, the adjusted price in February will be $291,000.
Sounds reasonable, right? Sometimes, that’s not necessarily a fair depiction of current market conditions.
Much of the Southern California market is driven by bank-owned properties. The banks, in an interest of disposing of the property, pursue a “fire-sale” pricing method in order to generate multiple offers. Ask buyers in the tony San Fernando Valley how hard is is to buy a bank-owned home. One of our borrowers has made over 30 offers, unsuccessfully, to purchase a bank-owned property,
The free market has “priced in” future market declinations and has “discovered the true bottom”. Still, appraisers have their hands tied. Pursuant to directives from the secondary market, the appraisers adjust those “free market base prices” because they were closed a month or two ago. The cycle becomes never ending. The lower adjustments provide an unnatural price pressure, driving prices even lower. The policy then becomes a market factor.
The policy can be counterintuitive to its originally stated purpose; to provide a “true” reflection of this “declining” market. It assumes that prices will continue on an 18% annual decline, forever.
-
Who Is "REALLY" Making $ In Today's Real Estate Market?
Our 29,689 Members Tend To Agree...
It's Usually Not The GURUs
Have you ever noticed that every "Guru" real estate pitch sounds the same........
They once were poor, but now are rich working only 5 hours per week, and you can be rich too if you just buy their "can't fail system".
Or have you noticed that every property promote has a can't miss proposition, if you just buy TONIGHT.
At the NoBullRE club, we are huge believers in real estate investing...... but we also know that every approach has two sides: Nothing is perfect.
If you want unbiased ("No Bull") facts of who is making money, how are they doing it, and where do they get their knowledge, then you don't want to miss joining the NoBullRE Club
IT'S FREE (FOR NOW)
SECURE & CONFIDENTIAL
Your info will never be shared
CONFIDENTIALITY GUARANTEED
