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| Investing in Real Estate in Uncertain Times |
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If you were to describe 2008 in one word, you wouldn’t get much argument if you described this year as uncertain. Lots of great things have happened this year, but they seem to have been forgotten in most of our minds. if you only paid attention to the news, this year has been filled with job cuts, negative earnings, and that dirty nasty F word (Foreclosure). The truth is that fear sells papers and makes great headlines on Fox News. Understandably, we have all been impacted and are concerned regarding the uncertain economic times in which we live. The buying and investing habits of “US Americans” have shifted and there are a number of myths and truths about investing in real estate in uncertain economic times that need to be addressed. The first myth, which is rampant in Charlotte, is that people are giving away their homes. As far as I’ve seen, individuals are not giving homes away. Banks are not giving homes away freely either. If they were, I would own them all. The reality is that prices of homes have contracted slightly while the days on market have increased. Generally speaking, the average home is selling in the ballpark of 94% of its list price which is certainly higher than the perceived average. The second common myth is that “a good deal” means paying 20-30% less than list price. While the criteria above could be labeled a good deal, it might not. There are other factors that buyers must consider as well. Two of the other factors to consider are location and condition. A person who buys a house today will hopefully live in the house for 3-5 years before they go to sell. If you put your optimist hat on, you could expect that the economy will be better in 5 years than it is today. When you go to sell in 5 years, you will want to own a nice home in a great location in order to reap the benefits of equity growth. If the seller of your home had to give it away because of the condition or location, then you will likely have to do the same unless you fix the condition or location. Trust me, It’s very hard to fix the location of your home which is why I advise people to buy a home they enjoy in the best location for their needs. Location matters in real estate because it’s too expensive to move your home somewhere else. The third myth in Charlotte is that foreclosures are rampant. The reality is that foreclosures are happening all over the city. Indeed they exist and sometimes they can be a good deal. For some perspective, it is not uncommon in places like Phoenix, AZ for 40% of the homes in relatively nice neighborhood to be under foreclosure or to have been foreclosed upon. At this point in time, Charlotte has yet to see any neighborhoods see these types of numbers. Foreclosures are lightly scattered all over town. All kinds of neighborhoods have seen foreclosures like Uptown, Providence Country Club, and Piper Glen. The number of foreclosed homes on the market for sale are much less common that the prevailing mindset would believe. These uncertain economic times are a tough investing market for anyone looking to pursue opportunities in these times. A few pieces of advice to consider regarding real estate investment: First, be patient and find a home you enjoy in a great location for your lifestyle. Second, if you want to buy a foreclosure pick a location and have your agent find a home that fits your goals and be prepared to invest some money fixing up the foreclosure. Thirdly, if you are going to invest in a home to live in, remember that a property isn’t a home unless you love where you wake up. Lastly, think 5 years down the road and try to imagine what will be attractive in the market. If you do these things, you will likely do well in your real estate investments. |
