This just in from John Burns, real estate economist and consultant. I subscribe to all his newsletters and have found him to be one of the few economists who gets it right every time.
Looking Ahead at 2013:
Assuming the economy continues to grow and interest rates remain low, which seems like the most reasonable assumption, here is what will happen:
Investors: Investors and, yes, even flippers will continue to grow in numbers as they realize housing is the best risk-adjusted return on their money.
Boomerang buyers: Foreclosed homeowners, who are currently renting homes, will come back in droves. In Phoenix, they are paying $1,300 in rent for a home whose mortgage payment would be $1,000. That situation is not sustainable. The Federal Housing Administration and Department of Veterans Affairs have low down payment programs with insurance premiums that push rates near 5.0%. Those payments are still very affordable.
Entry-level buyers: First-time homeowners, who have been sitting on the sidelines waiting for a sign of the bottom, will hear about price increases in their desired neighborhood and rush to become homeowners.
Move-down buyers: Empty nesters and retirees, who have plenty of equity in their existing home, will buy a home that is more suitable to their current lifestyle, which may or may not include adult children as well as their aging parents.
Move-up buyers: The price appreciation that occurred in the last year has already lifted 1 million underwater homeowners above water with future price appreciation to lift them even more.
What does this mean to me, the foreclosure buyer?
Well to begin, it means once I land a deal, I am going to have a very easy time selling. Multiple offers, selling over list, on good value, move in homes is a scarcity right now. Those who have that, and have bought, fixed and priced their house right, will make a really nice profit. My average deal is $30,000… but many of my clients in higher cost of living areas are making $75,000-$100,000 profit per house. That’s a great living folks. How many deals like that do you need to do to quit your job and invest full time? If ever there was a time, 2013 will be it!!
However, with any venture that pays so well, there are also challenges. I will have my work cut out for me as there is a lot more competition in my buying efforts. I can no longer sit back and wait for my realtor to bring me a motivated REO lead. Nor can I scan the MLS for languishing listings and write low ball offers. I have to reach where others are not reaching.
We are back to the buying systems that I applied in the early 2000’s, the last time we saw a big move up in home prices. It’s time to work pre-foreclosures. This time, however, I am pursuing those with equity and those without (short sales). I have to be selective here, as not all short sale lenders will approve investor wholesale purchases.
I’ll share those details along with many more, tonight in my Strategy Session “Your Agents Foreclosure Leads are Dead. Find the Hidden Deals Your Competition is Missing” Live at 6pm Pacific, 9pm Eastern. Maximum capacity is 200 attendees. We are close to sold out now. If you have not yet registered, please do so here asap. And then join early to secure your seat. If you can’t get in, or miss it, all registered clients will get a video replay. However, you will miss out on participating in my “Live Chat” with myself and my panelists at the end of the call. You don’t want to miss that…
I hope to see you tonight. We have some great new insight to share. I know it will be well worth your time. Talk to you then! Alexis