Are the Good Real Estate Deals Are Disappearing?

Question

For most real estate investors who have been chasing foreclosures, the good deals are getting harder and harder to find. I posted a discussion recently regarding the competition that’s occurring in most markets in the U.S. amongst buyers. Those that commented on the discussion agreed that there is stiff competition in their markets between home buyers and investors trying to get the good deals when they come available.

I’m hoping that there is still plenty of new inventory coming down the pipeline from the banks in most U.S markets. It seems like everyone has now come in from the sidelines to take advantage of deals in real estate.

What is the expectation of new inventory hitting the market in your area? Do you think there’s a lot more competition in your section of the market for real estate deals? Please share your comments on this discussion

Jeff S. · Answer

My observation is that there are at least two residential markets now.

Any property in decent shape from any source (REO, homeowner, or elsewhere) will generally sell to an end buyer. They’ll pay top dollar for a property that needs minimal to no work. 3.5% FHA loans notwithstanding, there are certainly less of these buyers now for all the reasons Don suggested above. In my view, home supply has dropped faster than the number of these buyers has dropped, thereby pushing (propping?) prices up. The increase is nowhere near dramatic however, at least not in LA County. It does make it impossible for a flipper to purchase and polish a home in order to squeeze a few extra dollars out of it.

The other market is for properties that are dumps; generally REO’s and unmaintained short sales. That is, uninhabitable properties in need of enough work to require the skills of someone willing to take the risk to purchase, rehab, and flip. I don’t know if the supply of these has increased or decreased due to bank manipulation, but I do know that the number or rehabbers (wannabe’s and experienced) has skyrocketed.

Every local REI club I attend is packed with those either looking for deals or selling questionable properties at inflated values. The resulting demand (can I use hysteria?) has pushed prices to near unsustainable levels. How near, and what will happen, is the question I wrestle with.

On one hand, there is a huge demand building as more rehabbers (skilled or not) enter the market. On the other are the banks, with a huge supply of homes they’ll eventually have to get rid of but are unwilling to do so quickly. At some point, oil and water will mix.

Jeff

Michael Lauther · Answer

Cory: While I see an upswing in cash buyers entering the market In Dayton there is still more properties than I can buy and would buy that fit into my buy rent and hold strategy.

In the Hamptons which is on Long Island a suburb of NY the market is improving but has started to slide again based on what local realtors have told me.

I am not a wholesaler and I do not buy to flip but most of the best deals I have seen did not come from MLS. They came from uncovering distressed situations that needed solutions.

Account Closed · Answer

Well said Andy, the good deals will always be around right ??!! I like that.

Account Closed · Answer

Kristine,
I think another factor that I alluded to in my original post is that a lot of people have been waiting on the sidelines and are now getting in the game. Waiting for bottom, but maybe waited too long for some, since many of them are paying more than they paid six months ago..you're right!

Account Closed · Answer

Thanks for the excellent comment Jeff. Great info.

Account Closed · Answer

Jeff S I don't know about your markets, but where I am prices seem more than propped up. They are up. I'd say controlling the opening of the spigot is working for the lenders. Prices are not up for everything. Short sale listing prices are are still low and look like deals from the asking prices, but they aren't really considered inventory by most retail buyers. The FHA buyer or buyer with a good DP is still focusing on props that are ready to go and where the seller can accept an offer and close. So the entry level OO buyer and the move-up OO buyer is paying more this month than 6 months ago in many neighborhoods where I am.

It looks to me like this could go on for a long time.

Mike Jakobczak · Answer

I think the opportunities are still out there. I think we have had it much easier to notice in the last 2 years due to the high amount of inventory. Now we need to start creating those great deals in our neighborhoods, instead of the deal being given to us. Focusing on great area's and good potential properties I think will be the key to continue in todays market.

Michael Lauther · Answer

K.Marie Poe recently reminded us that it is our ability to solve a sellers problem by providing needed cash. Currently it is the Banks problem that they created for themselves that needs a solution.
Admittedly this is one problem that will continue to haunt them for several more years to come but they will do their best to navigate the market and control it when possible to minimize their loss.

A recent move by some large institutions to manage the problem in some markets with experiments with fixing and renting properties is an attempt to minimize loss. IMO this will fail because
large organizations are ill suited to manage large numbers of SF Properties.

Given that these attempts to control a precipitous drop in prices are area specific you need to assess the impact on your specific area.

Andy M. · Answer

Regardless of the shadow inventory there will always be good deals available to investors who are looking for them. People are always moving, passing away, getting divorced, going bankrupt, etc. opportunities will always be there for those willing to help others get what they need out of a situation.

Jimmy C. · Answer

Market in FL is stabilizing. Supply (MLS properties) have greatly decreased. One of my friends (A HUD realtor) bids over ask every time to get her buyers in the houses available.

That being said, opportunity is everywhere as far as off market properties are concerned. Anyone who was marketing back in 2005 knows that the supply and demand of whats on the MLS makes little difference to the creative real estate investors inventory.

Are the Good Real Estate Deals Are Disappearing?

Are the Good Real Estate Deals Are Disappearing?

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