Recovery Mode?

If we really are in Recovery Mode, what do you do about it?

I’m in a “fortune rebuilding mode” and the real estate market is in a “recovery mode”. Good for me, I think these two modes should work together on this, don’t you?

Of course, it’s all about timing, isn’t it?In real estate perhaps the #4 most important thing (right after the first three: location, location, and location), is TIMING.

I believe we are in recovery mode. Most of my associates agree with me. Some do not. But okay. Let’s assume you agree with me.

What do you do about it?

First let’s talk about recovery. Since 2005 there are quite a few battle scars, and most of these scars have to do with the sinking marketable value of real estate. In the single family, owner occupied market there are home owners that have mortgages that not only exceed the current value of their homes but their monthly payments exceed their ability to repay that note.

The term “underwater” applies to these folk. Let me examine the factors that led to this and what is happening now that leads me to believe that we are in recovery mode.

 

Recovery Factors
Then ( August 2005) Now ( January 2012)
Loose Lending Requirements Logical Lending Requirements
Bigger Sucker Theory End user or Buy and Rent Buyer
Irrational Exuberance Cautious Optimism
6% money 4% money
Predictive Appraising Cautious Historical Appraising
Bigger Is Better Smaller is Smarter
Unemployment Low Unemployment High
Everyone Developing/Building Professionals Developing/Building
Time will heal my mistakes attitude Make no mistakes
Prices Rising Prices Rising
Consumer Optimism High Consumer Optimism Low
Conspicuous Consumption Flagrant Frugality

Of the all the recovery factors listing above, unemployment and consumer optimism remain as the two recovery factors that need more help, and recent trends indicate the unemployment is decreasing which will have a positive effect on consumer optimism.

Buyers and investors have had an attitude adjustment for the better and while money is harder to borrow, it is cheaper. Gone are the Mc Mansions and in come the smart homes.  Flagrant frugality is kicking out conspicuous consumption, and conservative thinking rules.  The market sank, big time, and with it took the inexperienced and the weak.   Fortunately those that remain are wiser for the wear.

As this tiring presidential election season wears on we will see more positive economic news.  Investors are not buying and then counting on a bigger sucker coming along and bailing them out, the exit strategies have to be well thought out and planned on before acquisition.

Will there be some setbacks? Sure, but the trend is toward a recovery and parity between replacement cost and cost to build – in both commercial and residential markets.

What to do now? 

Following are just some of my thoughts on this subject.

1.   First and foremost buy because it makes sense to you, not to someone else.  Know your exit before you get into a deal. But I would be buying what you can at as low of a percentage of replacement cost as the market will bear.

2.   If you are looking for a single family home, now is the time and in fact it might be a bit late. Inventory of the most desirable homes in the most popular areas is being depleted, and interest rates are still below 4%. For example, if you want canal front pool home in Cape Coral for under $250,000 less than thirty years old, there are now only 5 to choose from!

3.   If you are thinking of building in the future, consider doing it now, raw materials suppliers, builders, and land owners are cutting deals.  You may never build this cheaply again.

4.   Get your personal house in order. Before you venture out into real estate purchases, make sure your savings and health plans are in order. The expression “don’t bet the farm” was ignored back in 2003-2005. Certainly don’t do that today!

5.   Get rich slowly. There is no magic pill to recovery. Its happening and it will continue to happen, slowly, step by step.

6.   Look at the upcoming trends.  
    
a.   I see more concern about utility, water, and oil costs.  This is why we are started MA-Zero.  
    
b.   More infill properties close to paid for infrastructure
    c.   Smaller and smarter 

We are in recovery mode for sure; will I ever rebuild my fortune?  Well one thing is for sure:  I won’t rebuild it if I don’t try. 

You can choose to participate or sit on the side lines. 

Me?  I’m in there.

If I can help you get in there too, just let me know! 

Gregg Fous  800-439-1580  extension 52   gfous@marketamericarealty.com

 

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