It isn’t hard to find negative news on the current state of the real estate market. We were talking in the office yesterday about how almost daily there is a new article about the foreclosure rate climbing, lending getting more difficult, etc. The latest I read on cnnmoney.com was that the foreclusure rate (nationally) in quarter 3 was 30% higher than quarter 2 and almost doubled from quarter 3 of 2006. This is said to be affecting 1 in 196 households. Nevada had the highest foreclosure rate – 1 in 61 households – tripled from quarter 3 in 2006. California had the second highest foreclosure rate – 1 in 88 households – four times what it was in quarter 3 in 2006. Numerically California was the highest with 94,772 filings in the third quarter. Florida was the third highest – 1 in 95 households – doubling from third quarter last year with 86,465 total filings
How long is it going to take to get out of this glut? Many have said that we have to get through all the foreclosures first. How long will that take? The problem with this is that it has not and will not be a quick process. In addition, the foreclosures add to the already too-full pool of inventory on the market.
Right now consumer confidence is down. Even the savvy investors are afraid to purchase now because they are worried that their purchase may go down in the coming months from what they bought it at.
Where is the light in all this? The light is in buying right now. I know this is what all the Realtors are saying right now, and of course it has some motivation to keep the paychecks flowing, but it has a lot of truth to it. The fact is, right now property can be bought at sometimes pennies on the dollar. If an opportunity comes around to make a purchase that will cashflow, you should take it in a second. You can’t worry about whether you’ll lose $10k in value over the next year, you have to look at the 3 to 5 year upside, or even more. Real estate was never a good short term investment, and the market over the last few years influenced people to forget that. Real estate becomes a good investment when you can generate more money on a regular basis than you are paying out. If you can cashflow $50 a month, you can have as many as you want and you’ll only make more money. Now I understand that there is more involved (like having enough for emergency reserves, etc.), but this is a simple example.
Now is a great time to buy, that’s the positive. It stinks for people like me who are trying to sell their home, but it is a great time to buy.Print Story