Real Estate Investing

I live in a major metropolitan area - not big like New York or San Francisco or Chicago, but the metropolitan area is at 1.5 million.  I’ve recently been on a quest to find a buyer a home and we’ve definitely been on a roller-coaster ride.  I don’t like roller-coasters because they make me think my head is going to explode when the migraine sets in after being jerked, rolled, and having had my stomach fly up to my throat.  Just no.  

Fortunately, the roller coaster Aunt B. and I have ridden hasn’t been that drastic, but some of the results have at least warranted an upset stomach for me.   The problems we’ve encountered in the hunt for her home begs the questions B. asks,

And it just leads me to continue to wonder–when we talk about there being a lot of affordable housing in Nashville, is that really the case?  Right now, for instance, there are 695 houses on the market under $125,000, which makes it seem as if there’s a lot of housing stock for working class people.  But if sixty percent of those are pits that need major help before you can get into them, are they really real possibilities for folks?  Because, even if you can rehab them–if you have the skills–if you don’t have the money, is that house really feasible?

This observation led to another’s comment that really sums up a silent problem our nation is having:

But more generally, the loss of affordable housing stock for the lower 50th percentile of folks is the unmentioned scandal of U.S. cities.

Are there affordable homes available in our U.S. cities?  If they are affordable, are they liveable?  Do they require tens of thousands of dollars in renovations before someone can move in?  Will the pipes need to be replaced to gain a strong water flow free of potential lead poisoning.  Is the roof ready to cave in?  Are there vines growing out from outlets?  I’ve seen all of these problems in the last year - most in the past month.

Forbes magazine recently published an article about the most affordable places to live.  Included are Atlanta, Cincinnati, and Minneapolis… a city for every climate!

From personal and professional experience, I can tell you that although home prices are dropping daily and meeting qualifications of FHA loans may become more difficult, it doesn’t mean buyers will have an easy time finding a home that meets their needs.

People looking for affordable homes often need to have easily accessible public transportation, need to be able to purchase food nearby, should live in an area with plentiful jobs, and the cost of utilities shouldn’t be crazy expensive.  Are there really places like this out there?

Angelina Jolie, Brad Pitt, and their four - soon to be six - children will be moving into a home located on 1,000 acres in the south of France.  In addition to 35 bedrooms and a forest surrounding the estate for privacy, the home has some mighty fine neighbors including Bono and Johnny Depp.  The rest of the story.

I’m not kidding when I tell sellers that the return isn’t as great when placing ads in magazines and newspapers rather than investing in some online promotions.  I use Visual Tour software and Animoto (we talked about that earlier this week).  But another company offers “short documentaries” about high-end homes which I find fascinating.

In today’s residential real estate market, off by as much as 20- to-30 percent on a year-over-year basis in some regions of the country, brokers and home sellers have been forced to find ways to get biggest bang for their marketing bucks. And it’s no surprise that most of their budgets are being spent on the Internet.

According to the National Association of Realtors, between 85 percent and 90 percent of today’s buyers depend on the Internet for links to individual real estate agent home pages, ColoradoRealtor.com, Realtor.com, Zillow.com and corporate real estate Web sites.

The rest of the techno story here.

I still believe we are near the bottom of the market, though this writer disagrees. 

Can we expect a lone realtor to determine the exact bottom of the market for a potential buyer? NO! Not even the most esteemed experts know exactly when the real estate market is at bottom. What the realtor must do is give the best assessment possible and the best advice they can muster, and let the buyer decide - without hype.

And even if we haven’t reached the bottom … who cares?  If you are ABLE to buy a home at a GREAT INTEREST RATE and you NEED to buy a home, then by all means:  Buy a Home.  The thing is, it’s not just about your “investment” - rather it’s about having a place to live.  If you’re qualified and find a place you love, it may or may not be there in a month or two or five when the real estate market “hits bottom.”  If you feel like it’s home, then make it your home without being distracted by the yaysayers and naysayers.

If you’re waiting to see what the future holds, remember the future never comes. 

Unless you live on Mars, then the future could be coming.  And it could look like this.

Photo from here.

The owner of the company where I work in Middle Tennessee came to our meeting this morning and confirmed what we’re all thinking through some real evidence: the market is coming back.

Although he believes it’ll take until the second quarter of 2009, the biggest indicator is in new construction.  In my county, there were 75 more closings in new construction than “starts.”  This means that the building industry may be slowing down enough to get rid of the excessive inventory of new homes.  As demand comes back, then existing homes alongside more manageable new construction will stabilize the market.

Corbet Property Real Estate News agrees with this assessment, using for data the information that was reported in the Wall Street Journal,

Inventory levels are starting to slow with a prediction that when we reach a 5-month of inventory level sometime in 2009, which historically signals a tightness in the housing market, this will eventually turn around the housing market all together.

However, when we talk about a recovery we also should see what’s happened in the last two years.  The big guy from my company said that although our market is off, we’re off the least.  Our sales are only down 20 to 25% from the glory days of two years ago while the east and west coasts have suffered a reduction in home sales of up to 60%.  Those companies are going through some painful cuts, including cutting staff, closing offices, and renegotiating the salaries of managers just to keep the doors open.

In the long view, the agents who provide solid service and are committed to a career in real estate will survive.  Just as the mortgage companies who have smart lending practices in place will survive. 

On the commercial side, we heard today that commercial real estate is finally beginning to slow somewhat.  For example, one well-known pharmacy-type store used to allow franchises for almost zero down.  Today this company requires about 20 percent downpayment.

In my opinion and from reading and hearing what others are saying, we aren’t quite out of it yet, but the big improvement is coming soon.  I feel it in my bones!

Magnificent photo from here.