Good time to buy or bad time to buy?

Question

Ive been hearing a buncha smack about the current real estate market lately.  I was thinking, since the market is slowing down, declining, and foreclosures at a high, shouldnt that make it perfect for an investor to buy these houses at lower prices?  Not only they would be cheaper, these houses would be abundant.  I spoke to my dad, which does day trading with stocks, told me that it is a good time to buy, but it is really risky flipping a house during this time because it would take a longer to sell or worse, it wouldnt sell at all.  He told me that property taxes are going to rise 6.6% in our area next year also.  What do you guys think about the market?  what are the advantages and disadvantages for this market?

Account Closed · Answer

Different strategies for different markets.

Always plan for multiple possible exits. You can never predict accurately exactly how a deal will play out. Be prepared to hold as a rental, to sell wholesale, to sell after refurbishment, etc. In slow markets people with cash get better deals. People who are forced to sell do not get what they want.

The British call it horses for courses. What is right for one market might not be the best strategy for another market. When some markets were booming (Phoenix and San Diego) other markets were stagnate or rising slowly (TX north through the MidWest). There were even cities that were showing falling prices (Detroit when the factories were closed).

Deals are done because it is not as simple as picking up the phone to buy and sell (like with equities). Be prepared to buy when there is a great deal but expect a slow sales process when selling. Do not get forced out of a deal if you want to be profitable over time.

John Corey

Michael Rossi · Answer

If not now  -  WHEN?  There is no perfect time or perfect market to buy properties.  When is the best time to invest?  Now!  If you wait for things to be perfect, you'll never start.

Mike

Lynn Z · Answer

Flip shows have a following.  I know one that really was misleading. Got lots of  press.  Technically owner may have bought it this summer when he claimed he did but it was purchased by a realty group with whom he's associated  6 months earlier.  Also, "his agent"  shown on film came from that same real estate   chain.   The owner didn't have to have"his agent"  tell him what it would sell for...he's in a broker's office himself.   Average viewer would have said "Oh, that's his agent"  but appears they're all in the same office just putting a deal together.  I love the landscaper in Atlanta that claims he got paid to dig holes, place the plants and after the taping, come back and remove the plants.

Oh, well Hollywood, huh.  I'm surprised they get by with the claims they make.   If investors want to purposefully mislead people they could do a real good job.  They know alot.   Realtor/investors even more talent.

Jason Shaffner · Answer

Each local market is different.  Each price point is different.

My part of central PA has ground to a halt.  But rentals are getting scarce and rates are up.  If you are trying to sell something at market for 350K or above here you had better hunker down for the winter.  If you are in the 150k - 200k range it's not so bad because of the downward pressure from the buyers who were looking at 400k properties a year ago have adjusted.

Flipping will still work.  The speculators are gone now.  That's good.

On a side note, It'll be interesting to see what happens to all of the Flip This House, Flip That House type shows over the next six months.

Lynn Z · Answer

Here's an article from Sunday's paper.  Headline was coastal homes tank or something similar.  Second quarter sales  in 2007 vs. since 2005 were Charleston (-21%) Columbia (+7 %) HIlton Head (-47%) and Myrtle Beach-41%) .  USC, state government and Ft. Jackson help to stabilize the market but we're still seeing houses sitting a lot longer than that 80 day average they quote.

Just some local statistics for ya'll.

N/A N/A · Answer

Assume a buy and hold strategy, at least for the next few years. With that said, even though there may be problems overall, there is always a housing market that is growing.

In Vancouver BC, the market has been hot for years, and it still climbing (last year 15% appreciation).

Lynn Z · Answer

Yes, but you are in New York.  Everything is coming up roses there.  I read that high end town homes had the the best spring ever 2007.  That's something to brag about.  I have a relative/agent in a great coastal area sitting on a great development of town homes reasonably priced and no one is stopping by.  Winter will be tough for those guys too.   At some point I expect these type developments to begin lining up mortgages as incentives to move their product.  What do you think?

Florida probably already knows the answer to this.

Tom McGiveron · Answer

there's no doubt that it's definitely an interesting time to be in the business.  i love it.

Lynn Z · Answer

In this southern market, appreciation will run 2.5% in our town and 4.5% on the coast.  Now that school has started, there aren't any responses to rental ads.  More and more student condos are being built by developers by the thousands in our town which is direct competition to individual investors.

I am renting to graduate/friends who have jobs, going to law school etc. and want a nice house to live in off campus.  Good rents are hard to come by and investors are guaranteed vacancies if they plan to keep their property in good condition by leasing up good tenants.

Some high end properties have sold here recently that were sitting for a long time on the market.  That would be $750k and above homes.  Houses that are overpriced are sitting no matter how nice they are.   In town new construction has examples of quick sales in the $170k's but sitting in the $400k's.

Whatever you do in real estate this year be prepared to hold.  There are lots of empty houses that were never really fixed up that people are trying to sell and probably can't rent to cover their costs.  Winter will be hard.
I'm thinking seriously about  mortgage debt reduction just to have a safety factor in play.  You could carry the mortgage in a sale, for example, if it was paid off.

My lender states no problem with borrowing right now but there's nothing I see that's a real "buy" in the market right now.