In the last year I’m never been so popular with investors. I’ve gotten calls, emails, invitations to fancy dinners, drinks on the house. Yeah it’s been a fun year a wining and dining but unfortunately to investors I couldn’t put out much. See investors got so desperate for new fresh meat (houses not me) they did everything in their power to attract properties to them. Unfortunately, not many homeowners were selling.
Let’s talk a ride back in time. Investors came roaring into the real estate market soon after the massive real estate collapse in 2007 and 2008. Cash was king and investors gobbled up every opportunity big and small throughout Southern California and really the whole country.
In the last 5 years investors pushed and propped up the housing market. The strategy was simple, Buy and Hold. Investors bought up hundreds of properties at a time and smaller investor took what they could. At these bargain prices no ugly property went unnoticed. Once purchased, the property would be held for a number of years until home prices rose and then sold for a profit. In the meantime tenants would be placed in the property.
Personally I saw the buying boom start out where the housing collapse hurt the most, in the Inland Empire. As homes came up for sale investors picked up houses when the regular buyer was not interested or couldn’t get financed. On the flipside, sellers scrambled to sell as quickly as possible to get out of the mounting debt.
Years passed and the inventory of homes for sale fell but Investors still had a huge appetite so they moved west into nicer higher priced areas such as Orange County and Los Angeles County and bought everything in sight. In the last year, something happened that caught some by surprise, a Seller’s Market was born. Investors had eaten so much inventory that the regular buyer, (families, 1st time buyers, move up/down buyers) had no chance to purchase and the run up of bids to buy a home, any home, started. But the investor continued.
Fast forward to today. The regular home buyer has either quit or has been priced out of a home and investors have something of a hangover. Prices have risen so fast that even the mighty investor cannot make sense of buying homes at today’s prices.
Now we face a scarcity of homes for sale and prices are above the reach of families. Investing in real estate does not make sense for investors. Now, interest rates have started to creep up with the announcement by the Fed that it will start curbing back stimulus to the economy. For the first time since the bull run in real estate, home sales and those under contract have dropped. We also know that applications for new mortgages and refinances have slowed. These are strong indicators that the run on housing is nearing an end.
There have been investors that have started to cash in on their winnings and dump the homes they have purchased. I would recommend if you are an investor to look at your portfolio and consider an exit strategy. The indicators are strong and you can still take advantage of higher home prices.
Call me to discuss your real estate investments. We can see where you want to go and strategize a plan to get there. Diego Loya 714.989.6040
