**Okay, OKAY! I get it Already!**

Surviving a Slowing Real Estate Market

 

The real estate market, as a whole, is slowing.

It has grown quite entertaining to watch financial reporters
hyperventilating on-air as they announce the next proof positive of
what we already know.

Of course the real estate market is slowing. All markets slow!
They HAVE to at some point. After all, it was a great run.

I get asked a lot lately something like "what are you doing about
the slowdown?" Folks want to know what I'm doing, thinking that
what I'm doing might have some relevance to them. It might, and it
might not.

Here is where I differ with some real estate writers. Some say
something like, "it's always a good time to invest in real estate."
Hogwash! There are areas and times where it is smart to sit on
your hands for buying OR selling property.

You HAVE to understand what has been happening over the last year
or so, and I'm going to tell you what that is. It's not as
complicated as you might think. It's simply...

CHANGE

Yep, that's what you need to know. Change has occurred in most
markets and change will likely continue to occur. Change has
always been occurring, but now it matters!

Think if it this way...

Imagine the tide as it comes in and out of an area...let's say an
inlet. When a big, high tide starts moving out of the inlet, it's
a pretty strong current, and everything gets sucked along in the
current, like it or not. If you are floating in that water, you're
GOING to go where is flows.

On the other hand, when the tide at it's peak, there is no more
water flowing out of the inlet, in fact, the water slows or stops
flowing. The overriding current that moves everything is
temporarily gone.

We are at the point where there is no longer a strong current
guiding the overall real estate market. The nearly universal trend
of skyrocketing real estate prices isn't there anymore. Local
markets will be going in all directions (up, down and sideways)
without the influence of an overriding current.

So what does that mean to the rehab real estate investor?

Here's the bottom line. Now is the time to BE THE INVESTOR, and
investigate your own, local market and make some tough decisions.
You may find that it really is a good time to scoop up a few
properties. Then again, you might find that it's time to pause for
the cause. It's likely to differ city-to-city and perhaps
neighborhood to neighborhood.

To make that determination, you have to focus on your market...the
one in the neighborhoods you want to own property, AND you need to
find out the behavior of the folks who would buy or rent your
properties. Your focus has to narrow in.

Armed with the right information, you can make the right decision
about what your next move should be. Isn't that what being an
investor is all about?

Here are some morsels of information you should be looking into for
your area:

- What's the rental market doing? How many units are on the
market compared to last year? What's the demand for rentals?
Increasing? Decreasing? In my area, there is currently a glut of
rental units on the market. I was puzzled at first about that, and
then I realized that what happened was that when interest rates
started going up, everybody who could buy...did! More empty rental
units means lower rents as competition for tenants heats up.
What's happening in your area? Ask a property manager about how
the number of rentals for this month compares to the same month
last year? Bounce this question off several property managers and
see what kinds of answers you get. Even if you are a
rehab-and-retail investor, you need to know this.

- Has the number of homes sold really decreased? Notice that I
didn't ask how many properties are on the market. You want to know
if the overall numbers of properties changing hands in your area,
in your price range, has changed significantly. This will tell you
if the market size has decreased. A Realtor friend can give you
some idea, and a quality title company contact will also guide you
with this.

The number of houses on the market may be misleading because I feel
there are a fair amount of folks are sensing that the run-up in
property values is coming to a close, so they are putting their
house on the market NOW to get the most they can get for it. Hey,
I can understand buy-low-sell-high! Also, it appears that more and
more folks are not using Realtors, opting to sell their houses
themselves using a low-cost option. The number of houses listed on
the MLS (Multiple List Service) might not be the accurate gauge
that it once was.

- Are prices falling in your price range? In other words, how
many bargains are showing up? Nationwide, the trend is that great
bargains are not showing up all over just yet, but as the economy
and energy prices start to squeeze consumers, more foreclosures
will happen and more bargains will starting showing up. This is a
very regional thing. For instance, if a major employer in your
area closes up shop, your area may see many more foreclosures and
distressed property than the next state or town.

Armed with some idea of the rental and sales market in your target
areas, the answer whether to stomp on the accelerator or put it in
park becomes...

...it depends.

A rehabber who rents or leases in an area where rental demand is
decreasing should probably cool their jets. Keep taking the pulse
of the market. I mentioned that there are a lot of rentals
available in my area currently. I also know that rental demand is
steady, and there are a large number of apartment-to-condo projects
going on, which will reduce the number of units on the market in
time. It will turn around soon enough.

If your area's rental demand is strong and the number of available
units is steady, you're probably okay with continuing to acquire
property. Know your area.

If you rehab-and-retail, you NEED to know if the number of buyers
(market size) is shrinking because it will mean:
- your houses may take longer to sell
- you might have to do extra things to your property to make it
stand out in the market
- you may need to get creative in marketing your properties

You may also live in an area where rising interest rates has not
yet slowed the buying activity down. Ride the wave, but be aware
that it may crest at any time.

You may find that very little has changed in your target market.
Traditionally, the market most rehabbers work in (entry level
market) are less effected by a slowing economy and interest rates
than higher end properties. Know your market.

If you are rehabbing million dollar properties, then I suspect your
market is definitely slowing. Higher interest rates hit the high
end market particularly hard.

Finally, a note on change. When economies change from hot to cold
and back again, fortunes change hands. So, being aware and awake
to opportunity has never been more important than now. You are
going to have to talk about the market with more people, and
investigate things a little harder these days, but that's the price
of being the real estate investor. You can do it. Change means
opportunity.

Since change is GOING to happen, then decide how to deal with it.
Begin with the end in mind.

- decide what conditions will lead you to decide that it's time to
wait, or to start, buying more property...list them on paper!
- know what conditions will lead you to start selling off property
- while you're at it, make a list of exactly what your indicators
will be, and where to find the information you need.

There is NO ONE ANSWER to how I or anyone should handle a real
estate slowdown. But, I can tell you with complete confidence that
change is in the air, and local markets will differ town-to-town
more so now than in the past. So, buck up! Start digging and
become rich in information gold. Knowledge and information will
always precede real gold...money!