Why You Should Be Buying California Real Estate Now (Part 1)
There is so much press out there talking about how the housing market is going to hell in a hand basket (I?m looking at you, socalbubble). Phrases like, ?California Real Estate Market Continues to Crash? are being thrown around.
That doesn?t even make sense! If you are going to call a pricing downturn a ?crash? or a ?popped bubble?, it should happen suddenly, right? This is simply not the case with our gradual, predictable, and cyclical Real Estate pricing adjustment that we are experiencing here in Southern California.
I contend that it is downright irresponsible for these authors and bloggers to try so hard to push this ?bubble? concept on the public. The dotcom bubble was a true bubble, this is just predictability at its best. The people who stop listening to the nay sayers and start looking at the facts will profit.
Here is the stuff others aren?t telling you because it is fashionable to be negative and go along with the crowd. This is part 1 of a series without a defined ending. This is why you should be buying right now.
Foreclosures are an Opportunity, Not a Warning Sign
The vast majority of homes that are now facing foreclosure have been purchased within the last few years by speculative or uninformed buyers. This graph shows over 1,000 notices of default (NOD) that have been filed during the week of 10/22/2007 in Los Angeles County and the dates that the property was purchased.
http://realvana.com/images/articleImages/foreclosure-nod-real-estate.gif
As you can see, there is an obvious pattern here. There is a cluster of points at the end of 2004 all the way to the beginning of 2007. Each of these points is a piece of Real Estate that was purchased and now has a notice of default (NOD) filed against is by the lender on that property. All of these points represent a home that is behind on its payments to the bank.
These purchases were fueled by ever loosening lending standards from the banks and fraudulent activity from mortgage brokers.
Many borrowers got what I call ?Frankenstein Loans?, because these loans should have never existed. Mortgage products like negative amortization loans allowed people who could not afford homes to buy despite the price barrier.
This is what allowed housing prices to extend past equilibrium into unsustainable territory. That was the time for you to sell, while money was cheap or free to borrow.
This is the situation that gives rise to opportunity. For those of us who didn?t ruin our credit, didn?t buy an overpriced piece of Real Estate, and saved up cash, now is the time for you to buy. Here is why:
This is a graph of those same notices of default (NOD), but now it displays the amount of money in default.
http://realvana.com/images/articleImages/real-estate-foreclosure-dol.gif
In fact, the vast majority of defaults are below $50,000! For this amount or less, you could gain ownership of one of these properties.
There is a vast body of writing on how to turn these ?pre-foreclosures? to your advantage. I will not review them, but many of these systems work well. But be warned: Chasing foreclosures can be a full time job. Learning about them is another matter entirely.
For those of you who want to do the footwork, I will be posting free foreclosure and notice of default lists for download. Additionally, we will be releasing free software that will allow you to search and navigate through all of this information without downloading it.
Fortunately, there are many good deals available on foreclosed Real Estate available through traditionally marketed properties. These are called REOs. After a bank has foreclosed on a property, many times they will put that piece of Real Estate on the market with a Realtor. At least one lender I know reduces the price of the homes by 5% each month until it sells. It is a game of waiting and watching for the right deal.
Click Here to add your name to a list of interested buy-and-hold investors. Indicate where and how much you want to invest in your message.
Look for my next installment, part 2: The Real Estate Market Cycle and Irresistible Market Forces
The owner of Realvana, M. S. Gentile, is a license Real Estate broker who is dedicated to helping individuals and families find well priced housing and investments
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