KNOW YOUR LOCAL MARKET or FAIL!!

Hello, Michael. Thanks for this pertinent info. You're so right - it's necessary to know the market in which one decides to invest in. Knowledge is "game" in this field! Thanks again!

Yes Michael, you are correct. One must determine the supply and demand in their local market. Not only overall supply and demand, but especially the supply and demand for investor type properties if you are a wholesaler. However, the economy continues to stagnate. We are not in a typical cyclical recession caused by over production or inflation. We are in what is called a balance sheet recession due to the bursting of a giant credit bubble, whole different animal. Assets were purchased at inflated levels. When the bubble burst, the assets declined in value but the debt remained. The Fed is powerless to jump start the economy in this situation. Interest rates have remained historically low for an extended period of time and the economy continues to sputter. What banks and consumers are doing is resetting their balance sheets. It will take time. They have done a credible job of propping up the economy and the housing market to engineer a soft landing by restricting the housing inventory. Banks are doing short sales more now, so the stimulus of people living in their houses for free will go away. Financing is still tight. Banks are still sitting on a ton of inventory. I wouldn't say we are starting a continued uptrend in housing prices yet. An increase over dismal numbers still yields dismal numbers. The two animal instincts that drive a market, fear and greed are still absent. People don't feel compelled to buy. Interest rates are not going anywhere and neither are prices. People don't feel like they are missing out on anything yet. Just my opinion and I may be wrong.

You're awesome!

The market is always changing, so we must know our strategies to be able to quickly change with it.

I know one thing for sure. If you don't have a job it does not matter where the economy is or what actually caused it to be where it is. New jobs and business creation WILL increase demand for RE. ALL the problems will decrease when more JOBS become available. Private sector jobs, not union government jobs. (Taxpayers pay for those)
I know for a fact that inventory is decreasing in many markets. One of the hardest hit, Las Vegas is experiencing shrinking inventory and lower average DOM. When this happens it means despite all the "why the recession and we are doomed talk" someone is buying!! PERIOD.
So like I said, I don't watch RE on a national basis (or the economy for that matter) I know what is happening in the market on the very STREET of the property I am offering on.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

This is important to all that are making offers.

Michael

in YOUR market area

Michael, what are you doing different now to deal with the changing market in your area?

While it is true that sales are up in a lot of areas so are rentals. I think more people are still choosing to rent rather than to buy, because markets are still rebounding, and they will be for some time, even in Denver and other Colorado cities.

Mike mentioned the unemployment rate in his state or city. I think that most people don't realize how unemployment rates affect new or existing home sales, and it's something everyone here should read up on.

Had to raise my offer amounts along with making more offers. 40 to 1 is what I am getting these days. The spread between wholesale and retail has decreased due to massive demand. Retail prices are going up but not as fast as wholesale. REAL investor/buyers know whats going on and they know they have to pay more and their spread is smaller for now. Either that or get out of the game.
Here is a HUGE tip. I don't go after the properties that 99% of every investor that every read a book or took a course go after!! For now. Maybe again later.

Rehabbers that do it right are selling their properties on the MLS in less than 2 weeks. Full price offers. Somebody is moving in!

I really think inventory is shrinking nationwide and competition is going to increase, leading to multiple offers/highest and best situations becoming the norm. Watch the unemployment numbers. As soon as those drop and the environment for small business becomes somewhat healthy again the recovery will begin!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Post on local REI club...
"Marc, Your chances are slim to none. The competition to list short sales is really intense. You're up against teams that have done hundreds and are pros at the game.

Trustee Sale, Again, almost no chance at all. You will get outbid. Period.

REO? Like the above two situations, the competition is cut throat. Listen to the recently posted Norris radio show. His guests are top producing REO agents and they say that every reasonable listing gets 25-35 offers the first 72 hours and many are for 105% of retail and cash. It's brutal out there."

Here is what I base my analysis on....
http://www.sddt.com/Reports/article.cfm?RID=899&SourceCode=20120625czh&_...
"Both resold and new home inventories are at or near their lowest levels ever at a time when new home construction is still negligible in San Diego County."
...Lack of building permits shows builders aren't ready to participate in the sellers market

“Our active multiple listings (year-over-year) are down by 23 percent,” said John Altman, a broker with JT Altman & Associates at the San Diego Association of Realtors’ Kearny Mesa offices Monday. “We have only 6,300 units of inventory, which is about 2.2 months' worth. Six months of inventory is still a seller’s market.”
...Inventory is low. But it is artificially low.

"Altman said what also may be surprising is that despite the fact there are, by Nevin’s calculation, about 4,200 bank-owned units in the county, there are only 245 active REO listings — meaning the lenders are waiting for prices to rise before putting these homes on the market."
...Lenders are artificially constricting the inventory.

While interest rates may be at or near their lowest levels in 50 years, and the prices are significantly lower than they were at the start of the recession, the Realtors acknowledged that it may be much more difficult to qualify. Given what happened with subprime mortgages, they said this is a good thing.
...Lending is tight

Kelly Cunningham, economist for National University’s System for Policy Research said that about 100,000 jobs were lost in San Diego County during the recession, and that only 40,000 have been added back.
“We’re 60,000 short and we’re only adding jobs at about the rate of 12,000 per year,” Cunningham said. “So it would take at least five years to get back to where we were.”
...not a pretty employment picture.

So, as I see it in San Diego, lack of building permits, tight lending, and lack luster employment are not the under-pinnings of a solid sellers market. The only thing that makes this a sellers market is the fact that banks are artificially restricting supply. The sellers market could turn at the drop of a hat. You could go into a rehab thinking the market is going up and find yourself in a totally different market in 3 months. It is an artificial sellers market being propped up by banks holding onto inventory. The question is, without solid technical support for a sellers market, how long will it be propped up? Just my opinion and I may be wrong.

Great article. Has a GREAT hint on where to try and wholesale. It is right there in PRINT. Active market, much less competition! We are doing it and making a killing in the SAME market as San Diego.

The article also points out the fact that NO "shadow inventory" will ever be released in bulk to the public. NEVER. To do so would drive down prices even further. Why would any business do that? They got free money from the government that allows them to release their REOs in a trickle.

Did you notice how employment was mentioned?? You guys need another 60,000 or so jobs. Key factor in your market!!!

We also have the same issues at the auctions. Big buyers that do 10 to 20 a month can pay more because they are doing volume. Where we need to make oh say $25,000, they can do it and make $7500. Why? They are doing 10 a month! Those are the best buyers to put on your list.(hint)

There is nothing wrong with an UP market. I know for a fact that investors are making money big time in San Diego. They don't care about all that gobbeldegoop!!! Supply and demand, period. Banks ARE NOT going to release enough of their properties at one time to hurt the market. Their is nothing artificial about it. Business is business. We don't have some right to foreclosed properties.

Of course the article does not mention having your own MASSIVE marketing plan in action seeking out UNLISTED, motivated sellers! Very few and far between but they are there. Do what the 10,000 other guys are not doing.

Finally, if it is totally impossible to do a deal or your fear of what may happen holds you up, look to another area. OR just don't be an investor. There is ALWAYS risk in this business

Good Luck!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

The guys I know who are doing 30-40 deals a year sent out 88,000 pieces of direct mail last year in an area about 100 miles north of san diego

That is a .05% response rate (based on 40 closed deals) Shows how effective mailing campaigns are and the numbers you have to mail to establish a consistent money producing business! Not just get one or two a year and say how great letters are. 88,000 mailers is about $28,000 dollars in postage!!!

Don't get me wrong, we mail all the time. We market every way we can think of. We just don't rely on yellow, purple or green letters! We actually like post cards. If you look at them, you read them. You don't need purple, green or yellow letters to attract attention. OOPS!! That's not what every one else does!! We use no ones scripted text. And we target who we mail to. Potential motivated unlisted SELLERS only.

Most of my high end REAL LIVE CASH buyers have NEVER sent out a letter, they don't have a website or use the internet and they don't look for properties via any form of social media! They don't have the time for that! They buy from wholesalers, off the MLS, pocket listings and referrals.

Know your buyers and know your market!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Great article - always appreciate good information.
I have worked with many clients who have been heavily affected by unemployment- where one spouse if not both have lost jobs and either need new home or can no longer afford home they are in. Very sad to see but something to always keep in mind.

It is always nice when it's a win/win deal. It's nice when you can get some money back and/or keep a foreclosure off some ones credit report. Especially if they are going to loose the house anyway!
Once again, you have to know what the property is actually worth in your local market before you make an offer to a distressed homeowner.

Michael

BUMP

good info