My kids (and adults alike) love these huge bubble makers – they are awesome! It seems like the public feels the same way about the real estate market. One investor, friend of mine, who has been in business since the early 70′s – yes, 1970′s) is very skeptical. He says, “Maybe it’s just the old guy in me talking [kind of sounds like my dad], but I’m sure if this appreciation in the market is real or manufactured?” He went on to say that with the government backing so many loans at 3.5% down, so many home buyers are instantly upside down in their home after they buy it, as it takes about 8-10% to sell it.” I’ve never really looked at it like that before. My response was, “but hardly any other buyers are able to even get an offer accepted, let alone close on a home, due to all the investors gobbling up the inventory with cash!” My seasoned friend mused on, “Even with unemployment going down, I wonder how many of these new jobs are substantial… solid jobs – ones where people are making a good living and able to buy or invest with confidence.” I left that conversation thinking: 1) The market will keep going up as long as there is demand, and I know with my list of buyers, there is HUGE demand. And, it will keep going up as long as there is a perception of health in our economy – that seems what everyone wants to feel, even if it’s just a perceived reality. How long will it last? Or, at what price are these home unattractive to both investors and buyers? 2) Especially for investing… proceed with caution. Another friend at the table said that he will only invest if he knows that he can get out safely within 6 months. It’s interesting to hear seasoned investors say they are unsure and don’t know, especially when the wisdom of the day is to make certain proclamations like, “We got 2 years of appreciation!” or “Once the unemployment rate falls to ____, then interest rates will go up.” Some of these statements have truth embedded, but beware of those who “knows for sure.”
Another respected voice, Jed Kolko (Cheif Economist) says in a recent article, “that the next housing bubble is probably just a matter of time. But, as Trulia’s Bubble Watch shows, that time is not now.” See this interesting article HERE.
As a Curtis Park resident, I’ve been following the most recent news on the Curtis Park Village development – here’s a recent piece that goes a little beyond our Viewpoint news.
If you are like me, it helps to see a picture to help explain and understand complex concepts. An appraiser friend of mine does an excellent job of this on a consistent basis - check out Ryan’s most recent blog post HERE
[last news letter to our property owners, for whom we manage their properties]
Hope you are finding the spring enjoyable. As the weather heats up so are the sales. We’ve assisted several more owners since our last communication in selling their properties at the highest price and in a short time frame. Others have taken us up on doing a property value analysis and many of the responses have been, “Not yet.” Or, “I need to wait maybe six months before I sell.” Or, “When the value comes in at $ ______, then let me know and I’m willing to sell at this price.” I did comps on one owners condo 6 months ago and now the value has come in at nearly $40,000 higher! These figures have surprised us too and have shocked other sellers. Take a look at the graphs below that visually show what the market is doing. Give us a call or email us to take your next step.
As you can see, the trend is upward. Now may be the time to buy as well, as some are concerned about being priced out of the market, or wondering if properties will every cash flow again. We also began to hear some of our clients buzzing about 1031 exchanges (tax free). Properties with equity, but a depreciated base can sometimes be parlayed into two or three properties that generate more cash flow and have potential for some great appreciation. Let’s talk soon to determine your next steps.
Keith Klassen, Broker
JUST SOLD – 7113 Rimrock, Sacramento CA 95828 – It went into contract in one weekend with multiple offers – this seems to be the case on most listings these days. I hate to admit it, but I only went to this property two times – once to put the lock box on and take pictures, and once to take the lock box off. I began to line up lawn care and an open house, but it flew off the shelf so fast, none of that was necessary. The other trend is cash offers from large investment firms. It’s tough being on the buying end, especially with a loan offer, and even more so if it’s FHA. We received over 15 offers and the first thing the owner does is “throw out” the FHA offers. The negotiation phase is where I earned the commission… these investors come across firm, with a stance as though they won’t budge. What they don’t know is, I’m an investor too and I represent many investors. With this mindset, I was able to remind the seller that he held all the cards and there was a few more dollars to be made. The classic price reduction came once in contract and after inspections – we reminded the buyer that there were 15 others in line that would be happy to scoop this up if they did not move forward at the agreed upon price. There was a lot of squirming and posturing, but finally they conceded. Reminded me of putting my two boys to bed at night – whining, flailing, a little goofing around, then they give in and fall asleep. Like raising children, selling real estate can look easy from an outsider’s point of view, but experience (success and failures/battle scars) and a lot of finesse goes into making the outcome a success
Keith Klassen, Broker – 916.669.9030
Remember the last boom when buyers were saying things like, “I’d better buy now before the market increases too much.” Or the investor would say, “If only I bought last year…” This is the time to buy, if you can, but proceed with caution.
Currently the market is saturated with rental properties resulting in rents going down (not great for investors). What would cash flow 6 months ago, may not today.
With investors gobbling up the low inventory, people who actually want to by to live in a home (many times first time home buyers) are getting shut down and shut out. Be patient, prices may not continue to rise…. here’s a good read on why the market may not continue to go up.
Will more inventory come on the market as prices go up? This is what we are starting to see happen. Should sellers wait to get more over time? Or will they miss this golden opportunity to sell?
What does your crystal ball tell you?
Keith Klassen, Broker – 916.669.9030