The 2013 real estate market has brought with it yet another layer of complication for home buyers that have left many frustrated and on the verge of giving up the dream of homeownership.
Where Have All The Homes Gone?
Wall Street has applied a fresh coat of lipstick on the distressed real estate market it created by structuring risky mortgage backed securities that blended good credit mortgage loans with risky toxic mortgages and calling them “good enough” for investors.
The sequel, as sequels typically go, has generated a lot of interest in hopes that the returns to investors will rival the good old days of manufacturing artificial markets that pay big returns. The great wall street hope is called Rental Backed Securities.
Basically, large real estate investment trusts are snapping up foreclosures and short sales before they even have the ability to hit the market for the purposes of renting them out and selling the “rent flow” on Wall Street.
Investors are Artificially Inflating Home Prices
These investors have lots of cash and are paying premium prices for these homes completely ignoring the current market value for the area. For most of these investors, the money is in the rents collected, not the current value of the home.
For homeowners, the lack of available homes for sale and investors paying premium prices seem to be sky rocketing home values in many California counties.
The problem with this type of activity is that it creates spikes in the market. Large swings mean volatility. Volatility means that, depending on which side of the table you’re on, you either need to act fast if you’re thinking of selling your home, or have incredible patience if you’re looking to buy.
The problem with a real estate market that is being manipulated by the latest and greatest trend is that if investors change their attitude on buying up all of the inventory, what is the impact on an artificial market that they created?
If the lack of inventory is driving home prices up, does an easing of investor’s buying attitude mean that prices will slide back down?
Buyer’s worried that values will rise to the point of not being affordable might not need be worried if this current trend is causing a home values bubble that will correct itself when investor moods change.
Why Buyers Need to Be Patient
It’s much easier for investors to build relationships with investors and asset managers that are making decisions based on rental cashflow on spreadsheets.
As foreclosure and short sale inventory drops, are investors interested in continuing their buying and dealing with individual home owners?
If we look at year-to-date statistics in the City of Orange (where I’m located), we see a couple of trends that might mean that home buyers need to be extra patient as some of these things work themselves out.
Buyers Can Prepare for Opportunities in the Market
The real estate market in California continues to be completely unpredictable. This doesn’t mean that you will not find your dream home and be able to buy it at a great price, using a home loan with a historically low interest rate.
Yes, home prices will go up and down. Yes, interest rates will continue to go up and down. These are inevitable facts of life if you’re in the market to buy real estate in today’s market.
You cannot control investors, interest rates or housing inventory, but there are a few things you can do to be prepared to act fast when the opportunity to buy presents itself.
Maintain an Up-to-Date Loan Approval.
Get a loan approval from a direct lender and keep your documents up to date. This means sending the most recent 30 days pay stubs and bank statements up to date by sending them to your loan officer as you get them.
Hire an Agent that Knows the Market.
You have to stay at a high level of awareness in today’s market. Hiring an agent that understands the local market and can tell you which areas are heating up, or where the opportunities are when they present themselves, is the key to acting fast.
Do Not be Discouraged
In this kind of real estate market, it’s more important than ever before to manage your expectations. As the market becomes more difficult, more and more buyers drop out of the market.
This leaves more opportunity for patient home buyers that stayed present and alert. If you wait for the evening news to report that things are easier for buyers, it’s already too late. Having too much competition in a buyer’s market is just as frustrating as having less competition in a low inventory seller’s market.
Things can change on a dime in real estate, and there isn’t always a warning. Your patience will be rewarded if you manage your expectations and surround yourself with the right people.
Home Buyer Patience is Key to 2013 Real Estate Market was originally posted on FindMyWayHome.com.
