Why I'm planning on sitting out a bit longer

[Frank Adams]

Those of you who know me from my posts know that I've been an active investor for 30 years, and that I've seen some big market swings. I lived in Houston in the "boom and bust" late '70s and '80s (when the average house lost 1/2 its value and we got the innovative Resolution Trust Corp). I've evolved from a buy and hold with the occassional flip, to a guy who just flips and seller finances that flip.

I've stayed in touch with my market in the TX Hill Country until our move and I only did 2 deals there in the last 2 years, one thin, one fat! Our market in CO still looks like it's dropping so I don't see any reason to jump in it.

I'm sometimes a little impetuous, I often suffer from "gottadoadealitis" but as I've gotten older I've learned to slow down a bit and have not regretted it. I'm afraid that this might be exacerbated a bit because my income from seller financed mortgages has dropped from $85K/year to $30K/year with people selling and/or refinancing. Of course the upside of that is that I'm sitting on a pile of cash should a deal come my way.

Some of the evidence I've been looking at lately includes:

1. Although prices have dropped somewhat here, many of the new listings are going up at the high side of the market. Which tells me that reality hasn't truly hit the sellers, or that the agents are just taking the listings without explaining the facts of life to the sellers.

2. There are a fair amount of REOs on the market and some are selling (our local paper lists the transactions and one week the "sellers" of 32 of the transactions were lending institutions). Unfortunately the number of REOs has not reached the point where those sales prices are down to where I think they should be.

3. I see some "investors" advertising short sales where they've gotten permission to "deal" with the lender. But they're still trying to get above (the dropping) market. No thanks.

4. I'm just now starting to see increasing numbers of stories about how (formerly) middle class people are having to sell important possessions on ebay and craigslist. One said that CL's sales in March were up 70% from a year ago.

I am an optimist though. Reality hasn't hit enough people yet. They're still driving king cab, dually pick up trucks to the grocery store (although not as many people are buying them) and while starbucks sales/profits are down I still see folks in there putting the lattes on credit cards.

Another thing that makes me an optimist (about finding deals that is) is that I know that even in good times some people get in trouble. The problem is finding the ones that are (a) in trouble and (b) have enough equity in their property and/or their Lexus (did I mention we may be in the market to replace on of the cars?). It's a combination that's hard to find, not impossible, just hard.

Anyway if you find something let me know. Meantime I'm curled up with a big cup of coffee and contemplating some mailings.

all cash