Despite some popular belief I think that the market is very clearly, however slowly – picking up.
This past year we’ve seen big money investors like Wall Street hedge funds, private equity firms, and those with extra cash to spend gobbling up opportunities on foreclosed homes and turning them into rental properties. This is happening all over the California real estate market. The point being I think that we’ve seen the market hit rock bottom and the only way left to go is up. However slow that could be.
This year I think we will see a pretty steady price level – maybe a little bit of increase but it’s not going to do anything too unexpected. But the buying of foreclosed home for remodeling or as rentals is what anyone with some money to spare is getting themselves into.
In a TV interview even world-renowned moneyman and trading tycoon extraordinaire Warren Buffet said that he would be buying homes right now if he could figure out how to manage the properties.
He told CNBC “If I had a way of buying a couple hundred thousand single-family homes and if I had a way of managing … I would load up on them.”
I think that’s a good indicator of the type of market we are looking at – one that’s going to be getting better and better. And the people who have the extra cash have already been preparing. It’s a smart move no doubt – it will be interesting to see their return on investment a few years down the road.
A spokesman from GTIS partners recently reportedly said that his firm is planning on buying $1 billion worth of single-family properties and turning them into rentals. And even Oaktree Capital Management in LA told the public of its plans to begin raising money to buy $450 million worth. People are buying these homes like crazy.
But, it’s important to consider that unemployment is still very real for Californians. In January the unemployment rate in LA was 11.8%, which is only a 2% drop from the previous month. In Orange County it did the opposite by rising 2%. These aren’t good numbers by any means, and the fact that all of these homes have been foreclosed on isn’t either.
The real issues are that there is a lot more activity happening in the market, which is making the market improve slightly but the problem is that the rise is due to the foreclosures. This means that the average to lower income families are turning over on their house payments – because they can’t make them, and big business is coming in like the hawks for what’s left.
For a real economic comeback we’ve got to have everyone improving to some extent – not just the rich guys who are taking advantage of the unemployed people loosing their homes. For a real comeback everyone – well, at least most people – have to be gaining.
We’re not there yet, but we are closer today than we were yesterday.