I tell people we live in the last affordable ghetto in North Central Phoenix. We live right on the edge of the neighborhood, the place where $400,000 makes its leap to $750,000 on the way to a million. We moved here knowing what the neighborhood had to do, and, so far, it has not disappointed us.
This morning, I’ve been drooling over this listing. The comp value of this home in turn-key condition should be around $600,000, maybe more. Sad for the sellers, and I could kick them for letting the house go to hell, but this is a sweet opportunity that will bear fruit right about the time Persephone comes back from Hades.
This is my friend and client, investor Richard Nikoley, writing yesterday:
Probably not what everyone is thinking, right now, but if I’m going to keep my head about me and keep a market perspective on the market, then I have to consider that when some people sell out of fear, panic, to preserve diminishing profits, or to stop losses, there’s always someone on the other side of that trade. So the question arises — and one should always, always try to discern the motivations behind each side of a transaction — why are an equal number of people buying, right now, what so many are selling, right now? Could it be because others are selling at cheaper and cheaper prices and those buying are seeing bargain-basement prices? If you had to guess, who would you suspect is likely getting the advantage?
For some reason, people don’t tend to think of the stock market like they do most other things. In other areas, it’s called a sale. There’s always someone, somewhere, wanting to get out of an asset — for whatever reason — and depending on their motivation, they’ll take less and less for it. Others lie in wait for such opportunities in order to accumulate assets at relatively low prices.
Everyone is welcome to their doomsday, economic collapse, chickens-coming-home-to-roost scenario, or whatever. But do keep in mind that what is going on is essentially and mostly an exercise in total freedom and is completely independent of your predictions or judgments, regardless of how meritorious [sounding] they may be. Each player is out there selling according to his, her, or their own judgment; and others are buying according to their own judgment. Collapse essentially means: there’s no one to buy at any price; and that doesn’t even look like a remote possibility, even with credit (liquidity) getting tighter.
Technorati Tags: investment, real estate, real estate marketing
Chuchundra says:
I don’t see any opportunity in the current market.
We still have 500 billion dollars worth of sub-prime ARM resets to go through between now and the time we got to start hunting for the afikomen. Unless you’re scoring a ridiculous deal, I doubt that anything you buy now will be worth what you paid for it then.
I’m still willing to buy now, should the right deal present itself. The universe of houses that I’m actually interested in is pretty small and if something comes up that suits my needs and is a good deal, I’ll buy it and take the short-term loss. A house to live in is more than just an investment, after all.
August 17, 2007 — 12:05 pm
Michael Cook says:
I agree. I am the first one to feed at the bottom, but I really question if we are there (or even close). I think some deals can certainly be had now, but in six months we might be at Walmart levels.
August 17, 2007 — 3:13 pm
Anonymous says:
I cant beleive theres even a discussion of buying real estate now for deals. Its much much too early for deals. This housing market has way to go before the bottom is reached. Buy now you surely you will be under water.
August 17, 2007 — 4:19 pm
Brian Brady says:
“Buy now you surely you will be under water.”
That’s quite a statement. Do you think that’s likely in five years?
The problem with bottom-fishing is that you never know where the bottom is until you’re coming back up.
August 17, 2007 — 8:18 pm
Dave Barnes says:
645 E Harmont DR Phoenix appears to be a great deal for a librarian with DIY skills.
August 17, 2007 — 10:06 pm
Chris says:
Now seems like the time to buy, lots of great deals popping up. Who cares if they drop a bit more, as long as the cash flow supports them. Just sit and wait for the market to return than 1031 up to larger properties.
August 18, 2007 — 9:05 am
Robert Kerr says:
“Who cares if they drop a bit more?”
I do!
There are no deals in my area; prices have come down 10% but they’re still 25% too high for the supporting rents. I don’t see how it makes any sense to assume a negative cash flow on a leveraged, depreciating asset.
If I want to throw money away, I’ll go long on CFC. 🙂
August 19, 2007 — 11:08 am
RE Investor says:
Who cares if they drop a bit more?”
I do!
There are no deals in my area; prices have come down 10% but they’re still 25% too high for the supporting rents. I don’t see how it makes any sense to assume a negative cash flow on a leveraged, depreciating asset.
If I want to throw money away, I’ll go long on CFC.”
You may be right that prices still may come down, but, let me ask you this. What would happen if the banks, being tired of multibillion dollar losses from people defaulting decide that it may be more profitable to keep these folks in their homes, paying in some cases a healthy margin on the interest rate even without resets, decide to send letters to borrowers that they will not be adjusting upwards. What if, Fannie mae buys these loans and modifies them. Then immediately some folks thesis of a 25% loss evaporates. Before you start laughing, keep in mind that the positives to that move by the banks, election year government and even foreign investors in the current market far out way just sitting back and letting armegeddon come to pass.
Disclaimer: I own several investment properties in Phoenix – ground zero of RE abuse, so it would be easy for me to think in gloom and doom terms, however, you should know that I am in a positive cash flow in ALL but one property, have had long term tenants in ALL of my properties, and on paper still have not experienced a point close to where I would be underwater or over leveraged on any property.
I just think that like it was fashionable and there were a million people talking of the reasons why you should buy RE for the last 3 – 4 years, now it is equally fashionable to speak about doom gloom and multi double digit declines. The similarity of both extremes is that all involved assumed that “housing always goes up” and in this case “Banks will continue to throw borrowers out and leave vacant houses” The first “absolute” has already been proven wrong, now let’s see if banks will just continue to sit back and lose billions. My thought is that they won’t.
August 19, 2007 — 2:30 pm
Robert Kerr says:
What would happen if the banks, being tired of multibillion dollar losses from people defaulting decide that it may be more profitable to keep these folks in their homes, paying in some cases a healthy margin on the interest rate even without resets, decide to send letters to borrowers that they will not be adjusting upwards.
Interesting hypothesis. I’m not a lawyer, but that sounds like breech of contract and I expect they risk litigation by their investors.
Regardless, if it were to happen, that would probably rescue a lot of people about to be upside down, at least temporarily.
I think it could revive RE.
What if, Fannie mae buys these loans and modifies them.
Obviously, that would depend on the specific “modifications,” but based on FNM’s decision to pass on August’s benchmark, it’s not likely they will be taking any sub primes on.
August 20, 2007 — 10:57 am