Dean Graziosi

The median price of the homes has seen the least value this year since 1970. Distressed sales, foreclosure sales and short sales accounted for 30 % of the sales in this quarter; this has brought down the price of the homes. The single-family price median stood at $177,900 and, in relation to 2008, the third quarter was lower by 11.2 percent. Usually these types of properties sell at a lower price than the properties coming fresh into the market. The good news is that the inventories are low and, with the demand going up, the prices could settle down in the coming months. However, this would need buyers with strong financial strength.

The tax credit extended to the first time homeowners provided a good push to the home seekers. The application for sales has really jumped in the last three months, mostly to qualify for the Nov 30th deadline, which has now been pushed back to June 30th 2010. In addition, the tax credit to the existing homeowners of $6500 should add to the buying numbers. Adding to this right mix of buying stimulants is the interest rate, which has climbed down to a staggering 4.98 percent for the 30-year fixed-term loan. This lowering of interest rates, with the slowing down of prices, has made it lucrative for individuals who have been waiting with cash in hand for the right moment.

For real estate agents, the news is that one should look at focusing on low end, small budget homes, which are really making a big splash. In addition, the agents should understand the foreclosed property sales and the short sales. These are the two areas people are focusing on due to the current market conditions.

Stephen R Pearson, working with the Century 21 Classic Properties, commented that there is a lot of activity in this segment and it would really benefit the buyers if there were someone to help. There are certification programs available in the market, which act as great awareness and enrichment programs for the professional that wants to be ready for action.

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The 1.2 million member National Association of Realtors released their June pending sales report on August 4th, 2009.  For the fifth consecutive month, pending sales increased significantly and were substantially higher than year over year sales.  In fact, June 2009 sales were 6.7% higher than in June 2008.  June pending sales rose 3.6% over May sales.  The last time there were five consecutive monthly gains was in July 2003.

The bottom line is that residential real estate is selling.  The current market features low mortgage rates, depressed pricing and the availability of the $8000 tax credit for first homebuyers.

For the past several months, the FHA has been reviewing their appraisal policies.  A recent ruling requiring participation of local appraisers has helped to quell some unrest among investors.

The NAR maintains a Housing Affordability Index.  The index tracks important criteria and is a reflection of the overall buying climate.  The June affordability index stood at 159.2.  While down a bit from recent months, the index is 36.6 points more favorable than a year ago.  The slight rise in the interest rate from record lows still makes it a desirable marketplace.

The affordability index is so favorable that a median-income family earning $60,000 per year can now afford a home costing $289,000, well above the average selling price in June.

The Pending Home Sales Index is a leading indicator representing about 20% of transactions for existing home sales.  The index is based upon activity from the year 2001.  June 2009 is 59.2% ahead of the 2001 pending sales.

Many of these pending transactions are investment sales, short sales or foreclosure sales.  These areas are providing strong buying opportunities for investors.  Today’s real estate market is loaded with opportunity.  Experienced investors are getting pre-qualified and playing that chip to strengthen their position.  If there was ever a buyer’s market, this is it.

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Where will you be in five years with your rental properties?  Will you be enjoying a lifestyle that suits your personality and interests?  Or will you wake up each morning dreading an argument with a complaining tenant, or having to knock on a door and ask for rent that’s a week late?

We’re not talking here about whether you should be a landlord or not.  It’s more a planning issue, so that you can select properties and invest appropriately in order to accomplish your investment goals in a way that suits your personality and abilities.  An objective assessment of your attitudes and capabilities at the beginning of the real estate investment process is important.

·         Do you like working with people?

·         When complaints are made, can you handle anger or volatility?

·         Have you been stable in other long term endeavors?

·         Can you enforce rules and stand up for your rights?

·         Do you get along better with certain people types or income strata?

·         Can you handle surprises or uncertainty?

It isn’t necessary that you have all these qualities or abilities.  It is necessary that you understand where you excel and where you may need help.  Whether it is you, your spouse, or an employed manager, there are activities that simply cannot be avoided in managing rental properties.

·         Interviewing and selecting of tenants – including turning them down if they aren’t up to your requirements

·         Enforcing your rental and behavior rules

·         Collecting rents when they aren’t on time

·         Fielding complaints from tenants – whether they are valid or not

·         Responding to emergency repair issues – perhaps late at night

·         Doing all of this and more over a period of years

Many of us just seem to gravitate to a certain income strata.  You may do well with higher income tenants renting in more exclusive areas.  Or, on the flip side, you may get highly annoyed by a rich college student making demands on your time.  It could be that blue collar workers with families are just your cup of tea.  It doesn’t really matter.  What does matter is that, if you do lean in one direction or the other, you recognize that fact and invest in areas and properties that will bring you the tenants you’ll enjoy serving.

If some or all of the more people-interactive tasks are not your thing, it doesn’t mean you can’t own rental properties.  You may just need to make purchases that will return on your investment, even if you must hire help on a part or full time basis.  Or you may be able to let your spouse handle some of the tasks.

Learn what you like and do well, and find other solutions for the other requirements. 

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