RealtyTrac came out with some very telling research…
Combined with other industry statistics, they predict what is likely going to happen in the real estate investment industry:
3 main points:
1. Short sales will continue to decline
2. REO’s will continue to decline
3. Foreclosures sales may go up, although stabilize will be more likely
So what does this data mean to the individual real estate investor?
The biggest reason that we are seeing these trends is because property values have been driven up by speculative demand.
This speculative demand is spear-headed by hedge funds, private equity firms and REIT’s.
These firms are driving the prices up by overpaying at foreclosure sales.
If you have been to a foreclosure sale you have seen this happen with your own eyes.
Banks quickly caught on to this short-term dynamic and decided to start liquidating some of their inventory at the highest prices in years.
In 8 months, banks cut their short sale activity in half.
And why not, they were getting way more at the auction than they would have received in a short sale.
REO sales dropped from 20% of sales to 15% in the same time period as banks directed more properties to foreclosure auctions.
Over paying at these auctions has pushed the individual real estate investor, in some areas, out of the market. Over paying in other areas has forced individual investors to take smaller and smaller profits.
You may be thinking, “Why would these firms over pay for these properties?” “They will never get their money back, right?”
Well the reality is, that these firms never intended to be long-term landlord investors. Their goal was simply to purchase assets, rent them and then sell the rent in securitized packages to other investors.
This has already started.
Blackstone and American Homes 4 Rent both announced that they will continue selling these securitized pools.
You can, and should, fully expect other big firms to do the same thing. And soon.
Because these firms know this will be a short-lived trend and need to jump on the bandwagon before these investment pools get a bad reputation (which they will!) and property values drop once again.
How will you prosper during this mini-bubble?
To thrive through this coming mini-bubble, you need to buy extremely undervalued assets.
Assets like non-performing and re-performing notes.
Buying close to the bottom allows for good returns even if there are waves of fluctuating values at the top end.
In other words, if you can buy something at 40 cents on the dollar (as to its value), you can handle a 10% drop in asset value, without injuring your return.
It’s a very cool technique and way forward.
Come and learn from NoteSchool’s Joe Varnadore to find out more about the “Mini Bubble” on:
Wednesday January 27th in Greenbelt, MD
Thursday January 28th in Tysons Corner, VA
(both events are no charge for guests, due to the snow)
And then on Saturday January 30th attend NoteSchool’s “Gold in Notes” full day training workshop on Note Buying.
Secure the advance purchase price for your seat now at:
See you there!
Traction Real Estate Mentors