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Buyers and Sellers Can Take Advantage of a Real Estate Market With High Sales and High Inventory

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The National Association of Realtors reported recently that home sales marked their largest gain in the last two years in February, showing what some news media outlets say is “surprising” strength in the housing market. Surprising that people buy a place to live, is it, “experts”? Do the experts live in carboard boxes? Of course not. Do they buy boxes for vacation homes? No. They buy them in Florida and California.

Data showed that 6.91 million homes sold in February, up from 6.57 homes sold in January of this year, a 5.2 percent increase, and the largest gain since the 5.9 percent increase in 2004. Many blame mild weather in January for the “unexpected” increase in sales (because to experts, people stop living just because investors go back into the stock market, after leaving the real estate market, but these experts are not experts — they’re buffoons), but sales do tend to pick up during the third week in January. These sales continue to snowball until May, which is a dry month for sales, typically, then start again in June, snowballing to an overwhelming heat in August, stopping again in September with periodic sales in the fall and winter months.

Home prices dipped slightly, according to CNN/Money.com.

The median price edged down to $209,000 from $210,000 in January. Half of homes sold for more than the median and the rest for less.

The average price also slipped to $256,000 from $260,000. But both price readings were ahead of year-earlier levels, when the median price was $189,000 and the average was $249,000

Here in Florida, where inventory is abundant, prices continue to rise in some areas, and while so-called experts are saying the market is slow, I had four contracts last month, and I have four this month (more than this time last year when the market was “red hot” according to the same “experts”). The real estate market is only slow for those who have overpriced their homes, and are seeking to cash out for a value greater than that which the current market will support. Those trying to sell out of need will be more successful than those trying to sell out of greed.

Inaccurate news reports on housing spread throughout the media are not helping the public make clear decisions regarding housing, but they are succeeding in creating panic where panic isn’t necessary, which is incompetent journalism, in my opinion. Some editors should start firing their real estate writers if they’re going to blur the facts.

There are the same number of buyers in the market today that there were in 2004, and while some “experts” compare the current market to 2003, it feels more like 2004, because of the number of buyer’s in the market, while interest rates are at similar levels to those in 2003.

Prices have leveled off somewhat and inventory is abundant. The best time to buy is now, because negotiation is acceptable and deals can be found – this was unheard of last year! You can sell now if you like, but real estate is a long-term investment, it’s not an equity product. Keep that in mind. Holding it long-term is the best strategy, unless you have some sort of Trump-like designs on it, and plan on re-development of a property or developing new. In that case, it is best to hold it short-term and sell quickly for a profit. Otherwise, buy, rent it out, and sell it later for a profit.

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About Mr. Real Estate

  • http://elvirablack.blogspot.com/ Elvira Black

    Great info and advice as usual, John!

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    Thanks!

    -John Mudd
    “Mr. Real Estate”

  • http://alienboysworld.blogspot.com Christopher Rose

    I wish you worked in Spain, John.

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    A lot of people do. I had a developer from Spain contact me not too long ago who wanted me to market a condo project he had there. I had to refer him to someone else because I’m not licensed to sell real estate in Spain. It is a beautiful country, though.

    -John Mudd
    “Mr. Real Estate”

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    By the way, if anyone knows of anyone seeking to syndicate a real estate columnist who actually knows what he’s talking about, I am in the market. Most newspapers don’t seem to understand the real estate market anymore, as has been demonstrated by the news articles they’ve published on NAR’s recent report. How the St. Petersburg Times and CNN/Money can report two different things on the same data is beyond me, unless one media outlet has the editorial position to talk-down housing market, which is incompetent journalism, in my opinion. If home sales are higher, how is the housing market chilly? Times editors, care to explain? Please comment. There’s plenty of room in this thread and we would love to hear your explanation.

    -John Mudd
    “Mr. Real Estate”

  • http://alienboysworld.blogspot.com Christopher Rose

    Equally, if you know of financial investors or buyers interested in Spain, feel free to send them my way!

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    I would be happy to. Are you a licensed real estate agent/broker in Spain? If so, send me your info. via e-mail. Thanks!

    -John Mudd
    “Mr. Real Estate”

  • Bliffle

    I’m guessing that most US homebuyers are concluding that we are in for massive inflation in the future and that the home will be our best hedge and our best investment against that inflation.

    The inflation is caused by the reckless financial policies of the current administration, which we are pretty powerless to change, so instead of fighting them we join them. I don’t see any reversal in this wild spending for a bunch of reasons:

    (1) this admin is committed to the Grover Norquist theory that if one spends all the money in the treasury that the federal government must shrink for lack of funds, a theory they cling to despite the history of the last 6 years provides no support for it,

    (2) Bernanke (known as ‘anti-deflation’)), replacing Greenspan (known as ‘anti-inflation’), is bound to move the Fed Reserve a couple clicks toward inflation,

    3) the Fed has limited control over inflation anyway, as we see from the 70s when we had high inflation despite 17% interest rates,

    (4) no administration after Bush is inclined to introduce stringent anti-inflationary measures because of the political cost,

    (5) it appears that almost any financial public or private outfit is prepared to renege on it’s obligations with little fear of consequence so one must have greater control over ones financial future and reduce opportunity for fraud,

    (6) the only alternative to inflation is depression, and no one liked the last one we had, even the rich and powerful, so we won’t let that happen,

    (7) in spite of the admins poor policy the US economy is still the only one big enough to absorb investment by Big private and government investors abroad,

    (8) as the US sells less goods abroad foreign investors will shift to buying US capital instead of goods and land/homes are the best of those,

    (9) foreigners flushed with cheap US dollars will continue to bid up prices for US properties because their dollars were cheap and the US home market is very liquid and profitable, …

    I have other reasons, too.

    For US properties in areas with high intrinsic value, like the SF peninsula where I live, greater demand will force prices even higher and intelligent homeowners will find ways to increase their earnings. YMMV, especially if you live in Tenafly NJ and have a high heating bill: tho your equity may have increased greatly, your nut may be too small to get you into a better market, in a sort of capital version of David Ricardos Relative Advantage Theory. And if you don’t understand the math of basic Economic theory, you’re probably a loser who voted for Bush in 04 in spite of the mad policies and will lose your capital to inflation. Sorry.

    [Bliffle, please look up the word paragraph, thanks. Comments Editor]

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    The massive deficits we face, the weak dollar and the rising cost of oil will have more of an impact on inflation, in my opinion.

    People tend to invest in real estate for the same reason they invest in gold; over time, it appreciates. In fact, real estate even appreciated during the Great Depression.

    Of course, if a panic were created, which is what the media appears to be trying to do with housing, I could see housing prices drop to unreasonably low levels, but a panic-stricken market is not a logical one, and as smart mob theory demonstrates, logic does not necessarily control the economy; the Fed is a psychological mechanism, as far as fixes go.

    Inflation has always occurred, it’s just a question of when and how much, otherwise movie tickets would still be the same quarter they cost my dad to see a movie when he was a kid. It would be nice, though, to see employers inflate employees’ wages at the rate of inflation, which they have not done, at least here in Tampa Bay. We may have to write that rule into law if they don’t start catching up soon.

    While we’re at it, we need to extend the homestead exemption to be 50% of a property’s actual market value and extend it to investors and second homeowners. Bernanke’s creating inflation by raising interest rates, which I do not feel is good for the economy at this point, but he will slow raising rates soon enough, as many are getting sick of his rate increases, including folks from both main street and Wall Street.

    -John Mudd
    “Mr. Real Estate”

    [Cough, paragraphs, cough, cough! Myopic Editor]

  • Bliffle

    [sorry Ed. – I was in Blurt Mode]

    The prudent investor is well advised to prepare a soft landing spot abroad for the day when we awaken from the current drunken spending spree. Spain is a pretty good choice.

    Lew Rockwell has an interesting book review:

  • http://alienboysworld.blogspot.com Christopher Rose

    Spain has turned out to be everything I hoped for and an awful lot more than I expected.

    I haven’t been back to the UK since leaving, although my wife pops back over two or three times a year, and can’t see me going back until some family affair compels me.

    Must get my passport renewed one of these days or I’ll be testing just how far one can travel on a Spanish ID card!

    Let me know if you want to join the fun.

  • Jet in Columbus

    Here’s a good real estate tip for the rich and almost rich man.

    1. Buy a median priced home

    2. Rent it to a family that can’t get credit to buy that very home. Charge them a rental rate that’ll pay the house payments on it, plus maybe a little more for the taxes.

    3. Tell them your giving them a break on the rent by allowing them to do the upkeep out of their own pockets.

    4. After the real estate prices go up sufficiently enough to make a tidy profit, or for them to pay for most of your investment, sell the property for a tidy sum right out from underneath them, oh but wait until they’ve made enough improvements to make it look really nice.

    5. Buy another property nearby, and do your victims a favor and let them know that you own a nice house they might like to rent, it just needs to be fixed up a little.

    6. See step 1

    7. Do this enough times with as many rental properties as you can acquire, using them as collateral to buy even more, and guess what, soon you got enough for a nice villa in Spain!!!!!

    … of course that’s only my opinion

  • http://alienboysworld.blogspot.com Christopher Rose

    Well, Jet, the main problem with your entertaining, if unusually for you rather cynical, theory is that generally speaking property in Spain is very cheap compared to the USA so that wouldn’t be necessary. And that’s a fact!;-)

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    Spain’s actually a wonderful place to invest. You can buy oceanfront property there for under $200,000 USD.

    -John Mudd
    “Mr. Real Estate”

  • Jet in Columbus

    Somehow I knew I shouldn’t have bothered…

    but of course that’s only my opinion…

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    We appreciate your opinion, Jet. Your advice does actually work in some real estate markets. In higher-priced ones where taxes are high, though, instant cashflow is usually just a dream. It typically becomes reality with a large downpayment, or over several years time. Using the same strategy for commercial real estate can work wonderfully well in those kind of markets, especially since investors always increase the rents and tenants pay it.

    Cheers,

    -John Mudd
    “Mr. Real Estate”

  • Jet in Columbus

    Thanks for the cheers. The inescapable fact though is that a landlord with a good eye for property can purchase a house that lower income people can’t, and have his tennants pay off his costs for him. In fact, it ususally costs the renter MORE then it would’ve, if he’d had the credit rating needed to buy it himself, but leaves him empty handed when he leaves, and the owner with a property nearly paid off by someone else!

    ..Of course that’s only my opinion

  • http://alienboysworld.blogspot.com Christopher Rose

    Jet, er, that may be true and it may not be that great but a crime it sure ain’t – and that’s a fact!

    Do you like my new slogan?;-)

    And are you coming out of your closet and outing yourself or not?

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    Jet, I know it works for some, but here in Florida it’s harder to do because of high property taxes and insurance. It typically takes a higher downpayment to make the property cashflow. I typically can get someone with a 500 credit score 100 percent financing, though, so I’m not sure someone having bad credit is a guarantee of a tenant, unless the banks tighten up the money supply, which is what they’re doing now, but not enough to get rid of those kinds of mortgages.

    Cheers,

    -John Mudd
    “Mr. Real Estate”

  • Jet in Columbus

    Mr. Real Estate-I applaud your knowledgable answers; I knew that with a few well chosen remarks I could get some more untouched details out of you, and my respect for you has grown.
    Thanks for taking the time.

    Christopher Rose, I haven’t been IN the closet since I was 12 if that’s what you’re implying.

    It seems like a dumb way to meander off the topic.
    You see my tag line says quite clearly that I absolutely don’t know everything, that I’m falable and sometimes not even a good speller, but at LEAST I have the balls to admit I can be wrong with every comment I make

    I was taught at a very young age that “I don’t know” can be the most intelligent thing that anyone can utter…

    … but of course that’s only my opinion.

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    For investment property, it’s wise to put 20 percent or so down, if you want it to cashflow. However, I have seen some good rental property in Maryland that will cashflow at around $200 or so a month after the tenant pays your mortgage, using 100% financing. There are some properties that will work with here, but I mostly sell luxury and waterfront, and that’s the high-dollar stuff. Those take a lot more downpayment to cashflow. With investment property, typically investors want to achieve some cashflow, if possible, from my experience. Good investment properties, though, often have below market rents and an upside, such as location, or that one can fix it up to warrant higher rents after purchasing it and fixing it up, while attaining said property for less than it would be worth with above market rents because of ther lower rents it’s getting.

    You may notice, on commercial properties proformas, where the loss in rent vacancies are subtracted from the price. This is not necessarily bad for an investor purchasing the property, as long as it has at least one really good upside.

    Cheers,

    -John Mudd
    “Mr. Real Estate”

  • Jet in Columbus

    for heaven’s sake Mr. Real Estate. You’re GIVING information away free here. Do you realize the danger of all those late-night infomercial dorks suing you for putting out secret stuff they sell for 12 payments of $49.95 each!!!!

    sheesh!!!

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    I’m not worried, and that stuff’s not secret. Real estate columnists write this stuff all the time. It’s public information if you know where to look.

    -John Mudd
    “Mr. Real Estate”

  • Jet in Columbus

    No doubt about it, I’m going to have to start labeling my jokes so people know when to laugh

    ha ha

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    ::::does drum roll:::: ;)

    -John Mudd
    “Mr. Real Estate”

  • Bliffle

    Jet,

    Here in the SF Bay Area rentals seldom pay the mortgage. Rentals have been a good deal (tho it may not always seem that way to the renter) for about 20 years. Personally, I’ve rented houses to live in several times in the last few years, sometimes while renting out a house I owned! But I don’t like being a landlord and don’t like the risk/reward setup. My buddy J owns several houses in SF that he rents out (financed by his excellent income as a consultant) and complains endlessly about his negative cashflow and SF rent controls. But, of course, he will cleanup when he retires and sells them for the appreciated equity.

  • Bliffle

    Jet,

    When you improve a landlords rental property you must ask a quid pro quo. Usually, the deal is that the landlord pays for the materials and any hired specialty trades. The tenant does the work. But the tenant should also ask for an improvement in rental terms, such as a longer term at the same rent, an option to buy, etc. If times are tough, you can ask for a delay in monthly rent or even a trade of rent for work.

    I’ve done all those things, and on either side of the deal. Just remember this rule: there are 3 equally important attributes of money: the amount, the form and the timing. You never know which is most important in a deal until you make an offer. Don’t make guesses, make offers.

  • Bliffle

    Chris,

    I’m glad to hear that Spain is still as attractive a target for retirees and expats as it has been for many years. I advise any US citizen with a too-small retirement nut to think seriously of Spain. It is inexpensive, beautiful, the people are wonderful and the climate is warm and relaxing. I’m partial to San Sebastian and Bilbao as my brother-in-law has a nice place in Biarritz (dreamland for golfers) in the Pays Basque. It’s a short drive to Bordeaux and the border checks are abandoned (because of EU) so there’s no delays.

  • Jet in Columbus

    dear Bliffle, thanks for the input, however let me tell you a little story that I was a victim of, and may explain my point of view.

    In Columbus, we have an area just south of Downtown called “German Village”. Only 25 scant years ago, it was urban, run down, and not a nice place to live.
    One day some landlords got together and decided that what they needed was to attract a sub-set of the population that had lots of disposable income, and next to no family obligation. Let’s advertise for them, they’d fix the area up in no time-and on their own dime… and without even being asked!!!

    Rollllll out the welcome mat!

    Who?
    Gays! Two men with upscale male incomes and no family to pay for, feed, or insure-PERFECT!

    Obviously what followed was a contest.. No a war to see who could dwell in the nicest house with the best landscaping.

    Well, if you know anything about them, they just CAN’T bear life in a run down location, and within 10 years the whole area was so fixed up, that the city even posted freeway signs directing you to German Village. I mean it became the place to be. Posh resturants, good stores and great neighbors, parks and lots of beauty shops.

    Then suddenly all those landlords “found out” all those nice people were faggots (gasp)
    “Now that we got the neighborhood fixed up and nice, how we gonna get rig of all them damned perverts and child molesters and and and uh heathens?”

    Now comes the funny part.
    Now that the houses were all fixed up, they began evicting tennants wholesale, because there were no laws protecting against discrimination in housing for that particular kind of people.

    By the time antidiscrimination laws were passed, it was too late for them, or me for that matter to sue, even expost facto. We’d moved out years ago.

    German Village is still one of Columbus’ show pieces, though surrounded like an island by run down, crime ridden, low income urban housing, on all sides but downtown, and a lot of us have moved back… well those that can afford the rents that tripled and quadrupled “suddenly”.

    Do I sound bitter? you bet I am.

  • http://alienboysworld.blogspot.com Christopher Rose

    Jet: I didn’t mean to infer anything about your preferences, I was simply extending the phrase to refer to your possible outing of your id a little more by becoming a blogger or even a Blogcritic…

    When you’ve had a little more experience, you’ll even be able to get your jokes to work too.

    And that’s a fact!

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    Was that proven in scientific study #3349 or scientific study #4547?

    ::::does drum roll::::

    j/k ;)

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    Wow…there are a lot of comments on this post.

  • http://alienboysworld.blogspot.com Christopher Rose

    Bliffle: The profile of people moving to Spain has changed radically in the last 5 years.

    We still get the tired old folk as they finally mark up their 40 years of labour and retire to the sun but the majority of newcomers now are more likely to be in the 25 to 50 age group.

    People are now starting to move around Europe much as I guess they do in the USA; following jobs or family connections or simply deciding in what kind of a climate, region or culture they prefer.

    My wife Ursula and I moved over partially because we were sick of the English climate and we also strongly felt, and still do, that Spain is part of the new Europe in a way that Britain too will be one day, but we didn’t want to wait!

  • Jet in Columbus

    In regards to comment #31…

    In Study 3349, I quote, “With a negative aspect concerning resulting rationales towards percentages of population expansion in those areas, taking into account economic class distinctions, along with affiliated variables, versus the positive anti-reactionary conclusions based on several politically and commercially motivated studies, yielding several unsubstantiated claims, there would appear to be various destinations that the untrained mind could meander without the proper guidance…”

    However, in study 4547 I quote, “However, there contain several portions of the study that appear truly contradictory if not unsubstantiated, as opposed to partially substantiated, or completely substantiated. Whenever confirming scientific comparisons can be initiated through both layman and university classroom studies, resulting in not only a quorum on this very complicated subject, but also quite a bit of doubletalk, doublespeak, and of course deranged vocabulary lessons, yielding several radically different yet esoteric but conflicting conclusions.

    Seeing and reading that, I can see how you might get the two studies confused.

    Of course that’s only my opinion…

    …this has been a test of the National Emergency Broadcast system, had this been an actual humor emercengy, you would’ve been instructed to…

  • Jet in Columbus

    PS. I defy you to read the above out loud with a straight face… Drum roll please :-)

  • http://insiderealestatejournal.blogspot.com Mr. Real Estate

    ::::::drum roll:::::::::

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