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Posted by on Oct 27, 2012 in Flips, Market Buzz, Market Conditions, North County Coastal, Thinking of Buying? | 0 comments | Print Print

Investor-Driven Market is OK

In this article, the author claims that the real estate market will tank when investors leave the market, and then at the end says,

“The only part of the market that’s busy is the low end where speculators are fighting over a few measly crumbs. The rest of the market is kaput.”

It is typical doomer prose, and is speculating on the real estate market in general.

In our coastal region the market has fared much better, and should sustain just fine, as long as mortgage rates remain ultra-low (under 5%).  We saw here that our under-$1,000,000 market is sizzling hot, and that you have to get into the $2,000,000+ market to find any sluggishness - and there aren’t many investors in that pool.

Reasons Not To Fear Investors Leaving Our Market

  1. Those who are buying-to-rent may tire of the challenges of being a landlord, but they could sell instead.  The burdens of being a landlord probably won’t out-weigh taking a loss, so they will most likely learn a bit about screening tenant applicants and property managers before dumping properties.
  2. The pure flippers are making a killing now, and will continue to soak up anything under $500,000, put some lipstick on it, and resell.  Lower-end buyers don’t mind the spruced up inventory either, and their interest rises with the frustration of losing several bidding wars.
  3. If investors check out, then the owner-occupants with low-money-down will gladly step up – they get blown out in today’s bidding wars.  Nobody on the buyer side would mind if the bidding wars dwindle – which are happening on every decent listing under $500,000.
  4. The mom-and-pop investors would mind getting back into the flipping business, which unfortunately is now dominated with the large investor conglomerates who can purchase several properties per week – and would probably buy more if there were more available.

The casual observers in the media will continue to look for every reason to bash real estate, and look like a hero.  But they need to walk a mile in the shoes of those trying to buy a house around here, and see how competitive it really is.