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The Market Gives Us Another Investment Opportunity
By marionduffy | January 4, 2009
The steep decline in housing prices has brought investors to the market in full force. Many are buying in the bottom price range of the market. In Orange County that consists of primarily of low to mid-priced condominiums. These homes were hit really hard by the demise of the real estate market. Now we are seeing tons of short sale and bank-owned condominium listings and investors are scooping them up as fast as they can. While many buyers and real estate agents do not want to bother with short sales, bank-owned listings are receiving multiple offers and many of the offers are cash offers. Remember, this is Orange County and despite what you read in the papers about all the job losses and foreclosures, there are still a lot of people here with a lot of money.
The opportunity we have now is that the decline in prices combined with very low interest rates has made single family detached homes possible for many investors who otherwise could only purchase condos. When I make an investment decision, I like to look at the long term and I think that in the long run, a single family home is a better investment than a condo. Therefore, I believe that the current market is not only an opportunity for investors, it is also an opportunity to make a really good long term investment. Consider these points:
- In many areas, like Lake Forest, Mission Viejo, and Laguna Hills, you can now buy a single family house for about the same price as some of the condos a few years ago. These are generally small entry level homes, but ones that would make excellent rentals.
- While single family detached homes lost value in the market down-turn, they weren’t hit quite as hard as a lot of condos and therefore I think they will recover more quickly.
- When real estate is in an upward cycle, detached houses typically appreciate at a little higher rate than condos. So this is something to look forward to.
- Interest rates. What an opportunity, low prices and low interest rates! You must be able to qualify for the loan and provide documentation supporting your income and assets, but it should have been that way all along.
- Again, looking into the long term, when the market does turn around, we will probably reach a point where first time buyers will again be priced out of the market. (History has a way of repeating itself.) This will keep the rental market strong and I think single family houses will be more appealing to families than condos.
- As I mentioned above, investors are all over the bank-owned condos, particularly in the lower priced complexes. This could be a potential problem down the line. Lenders do not like to make loans in complexes that have a high percentage of absentee owners. Therefore, units in these complexes may be harder to sell in a few years because it may be difficult for buyers to get financing.
Please note that I am not suggesting that condos are a bad investment. They can actually be very lucrative. What I am suggesting is that the current market has given us other opportunities to consider. As with any investment, you need to do the research and do the math, and I suggest doing it for both the short term and the long term.
Topics: Lake Forest, Buyers, Real Estate Prices, Investment Property, Orange County Real Estate |