Articles
Investment Strategy in a Softening Market
by Bill Jardine Dec 12, 2005
Many of you will have all ready heard about the nation-wide slackening in residential real estate demand. The national news and business magazines have all featured articles from scary to speculative as interest rates inch upward and stories of wild speculation abound. We hear those stories too.
Our Exclusive Buyer’s Agency is designed for these times, and we are becoming more and more enthusiastic about opportunities for our clients, just as the Seller’s agencies are becoming more and more frustrated with properties they can’t sell anymore. Price reductions are becoming commonplace and many properties are now going into escrow just to coming popping back out a few weeks later.
First of all, it is good to see the larger picture in order to know what strategy to use in order to gain from today’s conditions. We are at an all together typical turning point in the real estate cycle. There has been a tremendous run up in prices as the thundering herds have crowded into the market place, and the speculators have been as common as ants at a picnic these past two years. We have even seen a certain amount of “panic” buying, where people have been buying things they don’t even like, because they are panicked that there won’t be anything left to buy!
Underlying the super-heated pricing has been the availability of very cheap mortgage debt, allowing people to make purchases far beyond their expectations. Lender have been so aggressive that they have thrown away most of their natural caution in an attempt to make loans. Our mortgage broker friends tell us that many people have borrowed the entire amount required for a purchase and have no cash equity in their property at all!
Blend to all this the demand by Baby Boomers for properties they can retire to, and it is easy to see how demand went crazy, supply couldn’t increase, financing was cheap and prices shot the moon. Could it go on that way forever and ever? Of course not.
So what is ahead? For the next couple of years we expect the speculators to move into the stock market, which is very under-valued right now. All ready we are seeing lots of quiet money pouring into domestic equities and Asian partnerships. Once the word is out that the market is on the rise, probably this Spring, the cocktail buzz will switch from who made what on a condo to who made what on a stock, and lots of folks who bought condos will wish that they didn’t.
This all means that smart real estate investing opportunities are going to present themselves to savvy investors, and that is where Jardine Investment Properties comes in. Most, if not all, of you are used to common real estate agencies, where the Realtor’s job is to sell the property. We are the opposite. We represent the real estate buyer, so we see our job quite differently. We are, after all, trying to get the price down, while the common real estate agent is trying to get the price up. These changing conditions are now swinging in our favor.
This real estate slump will not be long and will not be deep. The great wave of Boomers will break in a couple of years, and retirement-related realty will come under extreme demand, meaning prices are going to leap again. We are recommending to our clients that they work hard at negotiating attractive purchases during this slow-down so as to be positioned for the next wave of demand.
What should you do? Don’t wait until the last minute. Call us to begin the process that will allow you to be at the right place at the right time. We tailor investment strategy to each individual, depending on their personal goals and means. You never get a sales pitch at an Exclusive Buyers Agency. We have access to all listed properties, work with every listing agency, work with For-Sale-By-Owner properties and even go out and find properties for our clients.
Read Consumer Reports if you still think all this is too good to be true.
A hui hou,
William N. Jardine®
