Where Did The Cheese Go?

Last week’s column – The Cheese Has Moved – was about the dramatic change Kim and I witnessed at April’s foreclosure auction.  We watched investors pay a lot more for properties.  Higher purchase prices ensure thinner profit margins, and thinner profit margins mean greater risk – it reminded us a bit of 2005 and 2006.

Since the fattest deals will no longer be found on the courthouse steps, we’re forced to ask, “Where did the cheese go?”  In other words: Now where will we find the best real estate investing deals?

To answer this question, I’m on a quest to spend April knocking on sellers’ doors.  The goal is to meet face-to-face with 60 sellers.  On the front line is most often the best place to find out where the market is going.  (By the way, I’m posting the daily results from my door knocking on North Georgia REIA’s Facebook page.)

What am I seeing out there?  Real estate is experiencing an incredible shift.

The real estate bubble popped in June 2006.  That’s the month values started to fall…and baby, have they ever fallen!  This past week is the first time since 2006 that I’ve seen real estate values begin to rise! 

Want proof?  October was the last time I knocked on bunches of sellers’ doors.  Then, I saw lots of winterized homes sitting vacant with NO realtor’s sign in the yard.  This shadow inventory was all over our area.  This past week almost every vacant, winterized home had a realtor’s For Sale sign in the yard.  And if that isn’t change enough, almost every one of these bank-owned properties was under contract.  Are you kidding me?!

For example, there was a HUD house on Hotel Street in Adairsville, Georgia that Christine Topham had just listed.  After looking at the property on Saturday, I learned that she had four sealed bids coming in on this home – all from owner-occupants. 

On Tuesday, I met with three local bankers to see if they had any bank-owned property they needed to sell.  For the first time in years, none had any excess inventory.

This past week, I noticed that there are very few owner-occupant homes for sale.  Here’s the good news: The sellers with homes on the market are beginning to get a lot of showings.  For the past few years, unless a seller’s house was priced very aggressively, most sellers just heard crickets – they got no buyer activity whatsoever.

Bottom line: There is a substantial increase in the number of folks wanting to buy a property combined with a dwindling supply of properties for sale.  It’s simple economics: Increasing demand and dwindling supply can only have one conclusion – HIGHER PRICES!  That’s right, for the first time in seven years, we’re seeing home values beginning to climb. 

Is this the end of the real estate slump?  Not sure – the huge deficits our state and federal governments have run up scares me.  Only time will tell what affect our elected leaders’ stupidity will have on our economy, but for now, values are increasing. 

So back to the point of this column, where are the best deals to be found?  Because of our column’s limited space, I’ll have to answer this question next week.