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Re: R.E. Crash / F'Closure Bargains...Not Seeing It
Posted by Daniel on December 14, 2006 at 11:16 AM
In Reply to: R.E. Crash / F'Closure Bargains...Not Seeing It posted by Al on December 12, 2006 at 8:20 AM
1.) The local market here is in a malaise - sales are WAY down - but not prices. Seller are taking homes off the market and buyers are playing wait and see.
-->The number of sales is easy to track and stats indicate that sales are way down compared to the last couple of years. The statistics on prices (at least in OC, I'm sure surrounding counties fall in that category as well) are more difficult to interpret. You have to remember that we often get the MEDIAN price stats of homes sold. That doesn't tell that much about a market. The median can hold the same or even increase, yet home values are falling. People have to understand what the stats actually measure. You can't compare home price stats to the price on stocks as Real Estate comes with many variables, e.g. location, size, upgrades, etc. The median price stats very much lag behind what is actually happening in the RE market. I'm sure that 70%+ of all RE agents couldn't tell you the definition of the term MEDIAN. 2.) My contacts on Wall St tell me that as far as they are concerned the money markets feel the housing mkt has already bottomed out and there will be no across the board bubble bursting.
--> Look at RE history. RE didn't go up that bullish many times without a substantial correction. This wasn't an ordinary market; it was driven by easy credit, euphoria, and much speculation. Much is known what happens after that...People on Wall Street were also very optimistic before the great depression...My gut feeling tells me that the Federal Reserve, that created this mess in the first place, will have to look out for the dollar to remain in power. They can either save the dollar or decide to save the economy. Who knows if it isn't to late for either one. But I believe the Fed will keep interest rates low or even cut them to illustrate that it wasn't them raising the rates that caused the Real Estate market to crash. Once the RE goes down they can then save the dollar by raising rates without having to worry about being criticized for causing the RE to burst. That's my little theory. You don't have to agree and I may not be right about this either.
3.) The demand is HUGE locally - just be on the freeways at rush hour (all day is rush hour now it seems) and see how many people live here who need homes to live in - and thats not taking account of the ones coming.
-->We always hear this argument about demand and that land is limited. If that were true, then how come we had a correction in RE prices in the early 90s? If the limited land argument were true, then how come Japan had a bursting RE bubble after a similar percentage gain as we had here in the US over the last years? Japan is an island after all and their land is limited, but that didn't keep their RE values to crash in 91 or around that time.
6.) So prices practically doubled in 3 years and they go down say 20% - which I doubt - I'll take that return any day - you are still way ahead if you bought 3 or more yrs ago.
--> "If you bought 3 or more years ago" But how many people bought less than 3 years ago? How many people purchased 2nd or 3rd or more homes in the last couple of years? How many people used up most of their equity for instant gratification spending it in the local economy? What would happen if we see more and more NOD and NTS. Those homes will be sold below market value. Could it be that if the number of foreclosures were to skyrocket that this "below market value" becomes the new market value. Then the next “below market value” sets another market value, etc. causing RE prices to decline even further?
7.) It's true most that go to sale go back to the bene with little or no equity, however there is rarely a day goes by when usually several are sold that buyers will do well on, especially if turned over quickly.
-->IMO it's all about how much an individual is willing to spend, how much he/she would like to make on that deal, how well he/she knows of all the costs that are involved with such transactions, willingness for risk, etc. I believe that you must attend the action with a good game plan, due your homework on title history, market value, fix up cost, holding time, etc. I’m sure there are deals out there but something tells me that there will be many better ones to come.
Last but not least, this is only my opinion, nobody has to agree or disagree with this but I appreciate this forum and enjoy discussing such topics.
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