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*All data is approximate.
There are many ways to invest in Real Estate. But the profitable ways (for the little guys) are different, depending on where we are in the real estate cycle. To help identify the cycles, I've broken them down with the following nomenclature.
Characterized by risk aversion by the average home buyer, this it a point in the real estate cycle where property perceived as risky sells below its intrinsic value. Buyers begin to chase safe property with few flaws, and offering multiple bids for homes in good condition, appropriately priced, in desirable locations. This is a good market for "fix and flippers," but location needs to be scrutinized carefully.
Characterized by reduction in risk aversion by the average home buyer; sales at most price ranges happen with in 180 days, supply and demand are equal, and prices have been in positive territory year-over-year. Developers are willing to build on spec in developments that exceed 5 houses on a more regular basis. This is a good market for spec housing, potentially fix and flipping, but the margins in flipping will be smaller. It may, or may not, in certain locations, be a good market for mulit-family to condo conversion flipping.
Often Characterized by median sales prices jumping at more than 5% a year, with inventory not keeping pace with supply. Buyers risk aversion decreases, as they focus on housing fitting their needs, and the lack of availability drives decision making. This is a good market for mulit-family to condo conversion flipping. It can be a good market for spec housing, but at this point land prices are jumping smartly, and caution needs to be maintained. Interest rate risk must be watched closely. Although banks should be restricting credit in this market, often, the reverse is true - lending increases.
Smart investors in falling markets raise cash, for two reasons: Prices in 6 months will be cheaper than they are now, and cash on hand allows the sidestepping of credit issues for purchases, which is important because credit quickly dries up in a falling market, as banks restrict lending. Investors do well at foreclosure auctions, short-sales, (both in a fix-or-flip mentality). but must be careful to build in extra margin to account for increase days on market and falling prices. Generally, condo conversions will not do well as the first-time buyers run for cover, and inventory in this market increases.
We'll look at each of the market in coming weeks to talk about the options in more detail.
Do Good Things Today! Matt Heisler
*All information is posted in good faith and is assumed to be reliable, but may rely on third party information sources.
Busy weekend for Heisler & Mattson Properties this Sunday. Our OH (we had three) were all packed, showing strong demand from 400-600K. A particularly shiny home had very good feedback, and will probably sell quickly. With so few houses on the market, and demand this strong, it's hard to see how prices will stay flat or continue to fall - there just seems to be too large an imbalance out there.
Amazingly, I did see at least 6 groups that I have recognized as people who have been looking for 6 months or more. I can't help but note that for most people, if you're looking for more than 6 months, and still aren't close to what you're finding than: A) Get realistic! B) Try to find someone to work with who understands housing - stop wasting your time guessing & hoping the next house will be easy. C) Housing is EASY, if you do it full time. Otherwise, it's very hard. There are literally thousands of variables and the average consumer is (in my experience) overwhelmed, or worse, misinformed. Again, not everyone needs (or wants) professional assistance, but if you are going to 4 OH's a week, and have been looking for 6 months or more, I humbly suggest that you probably should.
Let's face it folks: Most people buy and sell a home once every 7 years or so. A good agent does any where from 700-2000% of that. Do the math yourself: If you did something 100x, would you be better at it than the first time? Bet you would.
Pending Sales in Southborough in the last week have shown both breadth and depth, with 4 homes moved to UAG status, (Under Agreement). This is a strong indicator of future sales, and is generally widely quoted in various economic reports. The pending were in 800K, 600K, sub 300 and probably just above 300. This is great news for home sellers as it indicates that there are buyers who can get financing and are willing to make offers in the bulk of the real estate market.
Southborough has been pretty hopping in the real estate sector. Within days, the pressure on neighborhood colonials began to rival other towns as two homes on Skylar, with very big differences between the homes, accepted offers within days of each other. This was followed by two splits (split-entires) selling for very good prices, as they were both in pretty good locations and offer good features. Still the splits are going to give their respective appraisers some difficulties, as the recent comps for that style aren't very good, (for their own reasons, and not really reflective, per se, of value) but comparables just aren't great in Southborough due to the low inventory (currently 47 homes on the market) and very few true comparable sales.
So: What does this mean: Well it certainly suggests that buyers are out there making decisions about homes and getting frustrated with the lack of inventory. Some of this is clearly due to the government incentive to buy, but at 600K, are people all that motivated about 4500 bucks? I'm not so sure about that. But with many good quality colonials selling in less than a week in popular neighborhoods, I don't think it's crazy to say that you're going to see bidding wars pushing prices up. The home on Daniel in Hopkinton is certainly an excellent example, but this is playing out in Holliston, Westborough, and Shrewsbury too.
