There has been much speculation and anticipation about where we are in this multifaceted micro climate of a real estate market. While some of the more affluent areas have continued to rise in value, other areas have hit extreme lows. The good news is the investors have come into the picture now and are making serious efforts to pick up fantastic deals. This is a good sign considering that the Bay Area market place will not go back to a normal state until the foreclosure market dissipates. The pickings are ripe right now for investors who are seasoned and have cash but not so well for newer investors who are trying to leverage the bank. The banks and underwriters have placed some hefty restrictions on mortgage loans that we have never seen before. Much of this is attributed to Wall Street getting involved in mortgage money and the serious amount of fraudulent activity that took place. We are also seeing multiple offers on just about anything that is of value and some properties are actually getting into bidding wars.
We have seen many frustrated clients this year who are still trying to hit a home run making low ball offers instead of getting to second base. The market has definitely shifted from where it was even six months ago and more buyers and investors have come off of the sidelines and gotten into the game. There is also another angle to this investment market that is different from any other moment in time. The foreclosure market is at an all time high and the banks have become significant players in the industry. This is giving investors who can pay all cash and close quickly a huge advantage over others because the banks have more security about the buyer's ability to perform. Investors who can pay cash are getting much better deals than those who don't. There is no doubt about it cash is still king!
On a different note, the real estate market is not as bad as the media has been telling us. According to the latest stats from NAR, the overall sales in real estate are only down 6.3% from where they were last year. This information is much more favorable than the 11 O'clock news reporting that everything is crashing and the forecast is dismal at best. Consumers should keep in mind that everything is cyclical including real estate and the Bay Area is one of the best places to be in the market. Interest rates are very low and the inventory is still pretty good out there. There is not nearly as much inventory as there was a year ago which tells us that people are still buying and selling.
For those who are interested in real estate investing, let's talk a little bit about strategy. Instead of letting greed get the best of us, we could simply look at the straight ROI (return). Make reasonable offers that will allow a fifteen or twenty percent return instead of trying to make a fifty percent return. There is no stock or mutual fund out there that will give a return like that and it would make investment sense. Don't purchase more properties than can be easily managed and are affordable. It is far too easy for investors to get bitten by the greed bug and take on too much resulting in a possible disaster. Make sure to be clear about what the investment goal is and what the strategy is. It is very important to have a clear and solid plan about the strategy. Some investors are looking for cash on cash return while others are looking for tax advantages or market appreciation through acquiring investment properties. There are many excellent opportunities in the Bay Area right now. This is truly the best real estate investment time the market has seen in over fifty years. It is no wonder that it has become somewhat of a feeding frenzy for the investor pool. This market should be prime time for the next twelve months ahead. The most important thing to remember is use common sense.
For more information about buying, selling or investing in real estate, please contact team enterprise. Cheers,
Matt Larsen