Real Estate, Investing, and "Bad Markets"

With all that has happened in the last month or so around the world with the credit crunch, banks failing, real estate prices still declining, and of course the great world of politics, I can’t help but think of lyrics from a song artist that escapes me at this time. “It’s the end of the world as we know it, and I feel fine.”
It is hard to keep a positive attitude on our countries financial future when we hear nothing but doom and gloom around us. One point of this whole mess that really struck home to me was CNN’s top ten most wanted for the cause of the financial crisis. One of the people named on the list was “you,” meaning each of us in the US. It really struck me with the fact that I do have some control with what is going on. I may not be able to bail out a bank, but I can start at home with bailing out my own finances. As with 99% of America I got caught up the notion that the ride we had from 2001 to 2006 was never going to end. Even though I saved what I thought was a good portion of my income, it was no were near the 10% that used to be our nation’s average. I also thought I played by the rules investing in real estate and putting money in mutual funds to help my money grow faster than it would in a savings account. Unfortunately, neither of the investments have shown the return that was expected, and unfortunately opening my IRA and 401K statements have been disappointing to say the least. So what next?
I haven’t written in a while because what’s next is to keep investing. I just finished up an investment home and sold it to a first time home buyer. I made more than I would have with just a regular commission, and still gave the client a great deal on a home. I am not saying that quick turning a home is the best way to make money in this market, but I found a great home that fit one of my clients needs and we took a foreclosed home and rebuilt it to his needs and helped out the neighborhood it was in. I wrote back in January that now is the time to keep moving forward with your real estate investing. People always look for the deal when they go retail shopping. Yet when it comes to purchasing a home or investments in the stock market, we shy away from the markets when they take a major drop. I do not know enough about stocks to know if buying now is a good idea, if that is the investment vehicle you want to use, consult a professional in that area. As far as real estate goes, even in Michigan, which is being written off by most of the country, there is still money to be made in this area.
Even if you are only looking to purchase a home to live in, buying when the market is near the bottom of the trough, (I say near the bottom because no one knows when we are going to see the bottom or when the turn around is going to happen), gives you the best chance of seeing the biggest gains when the market does rebound. This is one of the greatest opportunities that has been seen in twenty years to purchase. I have always been taught, when you don’t know what to do, look at the best people in the industry and follow what they do. Listening to Robert Kiyosaki in an interview on the “Real Estate Guys Radio,” he was talking about how exciting real estate investing is right now. Many of the big investors are currently out buying properties all over the US. These are the guys to follow and study if you want to be successful. I will be adding a few more books to the list I have read recently. These are an excellent source of education to understand how real estate, investing, and goal setting work.
Even with all of the bad news we are being bombarded with everyday, this is the opportunity that the big guys and sophisticated investors of the world have been waiting for. If it is the right time for them, why not have it be the right time for the rest of us?

Sellers Market Unhealthy, Unprecedented time for buyers

We saw more bad news in the papers last week with foreclosures rising 54% in Ingham County. New homes being started in the area through the third quarter are also down over 40%. Currently in Lansing as of today there are 5117 houses available for sale according to the MLS. Using the average of 366.5 sales per month year to date, this would mean we have almost 14 months of inventory currently on the market in the Greater Lansing area. It is no secret that the market has switched from a sellers to a buyers market.
Believe it or not this is one of the best times in the history of real estate for a buyer to purchase. The last time Lansing’s building permit numbers dropped this low was in 1982. Interest rates were through the roof and it was extremely difficult compared to today to get a mortgage. Even with the tightening of the market, there is a program for just about any one looking for a loan. I have seen some unbelievable deals on homes that have sold in the last few months. There are many different incentives and just regular price reductions that are going to allow many people who purchase right now a chance to have large equity positions in property in the future. We just came off of the longest run in housing growth in US history. Metaphorically, the new years party ended and it is currently mid morning Jan. 1st and the hangover is really setting in. Some people really tried to play the market, especially in some parts of the country were there was 15%-30% gains per year in housing value. They jumped in at the end and are currently getting burned. Michigan’s real estate market isn’t healthy if you are a seller, but in very few instances are the consequences of purchasing a home in our hottest markets of 2004 and 2005 going to have as much of an impact dollar wise as someone who purchased in Florida or California. One thing I will guarantee you, in the future, real estate will be more valuable than it is currently. I don’t have a crystal ball to tell you how to time the market and I don’t think that we are going to see the type of market we saw a few years ago for quite some time. Our area was overbuilt, financing got a little aggressive, and it is going to be hard for a while for some people to be able to get their money back out of there homes. However, we are seeing signs of the market stabilizing.
I have accumulated the building permit data for the area for the last 30+ years. It is easy to see to see the trend of the growth and then a sharp drop off for a few years. This would coincide with the existing home real estate market as well, since new homes are primarily needed when there is growth in an area. The easiest way to track new home growth is by looking at the employment growth in an area. The more job growth the more new construction that can be absorbed in a market area. Looking at jobs in the Greater Lansing area from 2000 to 2007, there were 10,000 jobs cut out of our market. This data was not seasonally adjusted, but it still shows a downward trend which would create a situation where existing housing stock would be in over supply, let alone adding new homes. New construction permits pulled were at record highs in 04-05 which has now caught up with us. The good news, we have seen employment numbers stabilize over the last year. This is a good sign for the market, because we should start to see our local market stabilize over time. For buyers right now, if you need a home there has never been a better time to find a good deal on a piece of property. When the market does stabilize and we start to see growth, people who purchase now are going to have the best chance of being in a great equity position in a few years. If you are thinking about real estate investing, now is the time to start researching properties and neighborhoods to learn values. With foreclosures at an all time high, interest rates at an all time low, and the new job announcements in Lansing and the surrounding area this market is showing signs of being healthy again faster than many of the other areas in Michigan. If you are interested in seeing what properties are available right how, please visit my website www.lansingrealestate.com, click on listings and MLS. You can either search properties my company currently has listed, or search all listings in the MLS by clicking on the MLS button in the upper right corner. If you are interested in government foreclosure homes, check out www.homesales.gov. This will give you the list of all the government foreclosed properties in the US. For strictly HUD homes in Michigan here is the link to Michigan broken down by cities. http://sales.clfres.com/SelectCities.aspx?State=MI&DollarExclusive=Y
If you are interested in viewing any of these homes, or have any questions regarding real estate investing or purchasing, please post a comment, or email me at brent@lansingrealestate.com. I will also be posting some of the podcasts that I listen to regarding real estate investing and real estate in general, as well as links to other sites I find useful.
Please let me know what other good sites are out there, I am always looking for more information. I am working on setting up to interviews regarding real estate investing. One from an investor that just purchased and flipped his first piece of property, and one from a gentleman who has been buying flipping and renting properties for quite some time. I hope to have these within a week.