I was recently invited to participate in a panel discussion in front of my local Real Estate Investor Association (REIA). We were asked “Where do you see the market going?” I answered:
1) We will see a continuing of the recent market; slow sales in terms of quantity and moderately dropping prices.
2) You will see more bad deals
3) You will see more good deals
Continuation of the current market
Even if the current Mortgage crisis corrects itself quickly we need to remember the underlying softness in the market started long before August when the current crisis started. As I take my morning walks through my neighborhood I see several vacant houses; some are in foreclosure, some bank owned, some expired listings and some just listed properties that have been on the market seemingly forever. Now we have reports of a recession and consumer confidence lags. I think we will see weakness in the market for some time yet.
You will see more bad deals
As investors who overpaid get caught in the current market they will try to sell. Since they are upside down in their properties, owing more than they are worth, they will try to sell at prices that don’t make economic sense. Don’t bail out an investor (or homeowner for that matter) by getting into a bad deal yourself.
You will see more good deals
As sales slow and inventories of properties rise, owners that must sell must also drop their prices. Banks in particular do not want to hold properties for a long time. As foreclosure increase it will cause a downward pressure on all properties. Short sales (negotiating a lower payoff with the bank) may be an option for people who are stuck and an opportunity for buyers that know how to negotiate them.
So as we move into a buyers market there will be many good deals to be had. But not all deals will be good. You need to be more diligent in selecting and negotiating your deals. You can no longer count on a great market bailing you out of your mistakes.