OfflineIn a New York Times article this week, the dismal first quarter S&P Case-Shiller numbers are mentioned, but the story is about analysts who believe that the bottom is near in most real estate markets nationally.
That’s not to say that they expect prices to rebound anytime soon. In fact, many believe there will be another 5% drop followed by a “bouncing around” in a narrow range for several years. However, the prospect of a cessation of consistently falling prices is good news.
With housing prices at values not seen in 35 years, there are predictions that there is a building pent-up demand that must be unleashed at some point. It’s when that point will be reached that’s the question. Another, more optimistic analyst, expects a turnaround that will result in a 25% rise in prices by mid-decade.
Home buying is very dependent on consumer sentiment, and the May consumer confidence index fell from 66 in April to 60.8. This was definitely not the predicted 1% rise. The May level is the lowest since fall of 2010.
The thing that I notice about all of these Government stats, is that they are skewed to show what the government wants. They can take pieces of the stats out to make the numbers fit their agenda. Then you have the analysts. They are making projections based on current market activity, not realizing that the government is going to be making major policy changes during the time period that will drastically change the game. Predictions are hard to pin down in today's economic climate.
With that being said, the market has dropped so far in the past few years, that it is going to be hard in some areas for prices to drop much further. I just spoke to a lady in Michigan who is buying a property for $5k, on seller financing, and there is already a tenant in the house paying $750 a month! So I don't care if the market drops another 50% in that scenario, because the cash flow will not be substantially affected by a major drop in that property's value!
So while looking at these reports and information, keep in mind that regardless of the economy, we can get some great deals set up. And, in fact, oftentimes BECAUSE of the economy, we as investors have much more flexibility in structuring deals with creative financing and seller carry backs. The last three deals I have done, haven't even involved myself or partners dealing with a bank.
Happy hunting!
We just moved to the Chicago burbs and the news reported yesterday that housijng prices are still falling in the area. As mentioned, and what is taught in the academy,local markets can vary over national trends. Since I am new to this market I have a learning curve that can be accelerated with a good success team.
Right now I see prices being great for the investor, as well as financing - for those who can qualify. HOwever, when buying a home for investment, I think it may be an advantage to have a couple exit strategies going into the deal. What I mean is.... you may want to buy, fix and flip without having a buyer before you close. To prevent a bunch of holding costs until the home sells, you may want to lease-to-own or rent the home. Before you can do this, you want to ensure the property will cash-flow. If it won't - it's not a deal.
As for the scenario provided: $5k for a rental paying $750/month.... NO brainer! That is a deal all day long! And, worth financing w/ a credit card.
Right now this is all theory for me (so read my post w/ a grain of salt), but these are all things that are in Dean's teachings and the Academy. I look forward to making my first deal (first five actually)and getting a huge monkey off my back. If anyone has insight to the Western suburbian market of Chicago I am open to a mentor (if this isn't the appropriate forum for such solicitation, my apologies. Please tell me how/where to do this in a private message).