You've heard all the hype - the sky is falling... foreclosures, foreclosures, FORECLOSURES!!
I would like to take some time to differentiate between what is happening in residential real estate in Colorado versus the rest of the Country. Colorado is experiencing the third highest foreclosure rate in the Country by some accounts. While that sounds scary, let me explain why this will actually be good for our local market.
Let me first say that I personally hurt for anyone who has lost, or will lose real estate to foreclosure. It must be an extremely painful, humbling experience to have to endure. There is much blame to be shared for these tragic events.
Colorado has, overall, experienced a very soft residential real estate market for the past five years. During this time, many pockets of the rest of the Country saw unsustainable appreciation, even in the midst of very soft economic times. The contrast between the Colorado residential real estate market and the rest of the Country is important to understand because it served to bring Colorado much more in line with national housing prices. During this time there was, in fact, much money made in the national housing market. Savvy home-owners understand economic fundamentals and know when to get out of a topping market. (I'm sure there were many people who cashed out as the NASDAQ was approaching 5000 several years back.) Those people who are knowledgeable enough to not get left standing without a chair will be looking for a good place for their next real estate investment.
You see, the key to making money in any investment is in being able to foresee the future. This is not "crystal ball" stuff. Markets leave leading clues. The art is simply to be able to see those nuances that are there. In any investment, you buy before a market goes up and you sell when it is about to top out. All markets have cycles.
Some leading clues - Colorado has a good supply of foreclosures and a few good deals are to be had. However, most foreclosures are going at about 90% of the going market price for homes. Considering that this market makes up less than 2% of Colorado's housing market, this will not have a substantial impact on the local economy. In fact, the more foreclosures that get purchased, the stronger the housing market will get. What is more important is that Colorado's economy as a whole, and the job market in particular, is strong and getting stronger. This will provide for an influx of people, and because of the types of jobs being created, will result in a solid percentage of new home buyers. The local commercial real estate market is already very strong, setting the stage for the influx of good jobs. Separately, the local new home construction market has diminished substantially recently. All this will create not only a good opportunity for home sales, but will begin to serve to boost home values.
I think many people have learned a valuable lesson with regard to housing recently and while I see growth in local home values, I see the marketplace moving forward very responsibly, say at a 3-5% appreciation rate for the next 5-7 years. This moderate growth, barring any unforeseen calamities in the economy, will then be sustainable for a long period of time.
Nationally, I think we have a good guy, Ben Bernanke, at the helm of the Federal Reserve. His controlled-growth model will serve to stabilize the national economy and that will be good for everyone.
My recommendation to investors seeking "deals" through the acquisition of foreclosures is to consider a buy and hold strategy. Not many properties will be ripe for fix and flips.
Remember this - money is made when the investment is purchased, not when it's sold. In other words, buy smart on the front-end and the back-end sale will take care of itself.
So, don't worry about the Colorado residential real estate market. In fact, since I project that we here in Colorado are at the very beginning of our upswing, I foresee that now is the time to start buying.
If you want investment property, now is the time. If you want a second home, now is the time. If you want to sell and move up, you got it, NOW is the time!
And if you need advice on how to most effectively finance a home purchase so it best fits your overall financial goals and life plan, please contact me.
Greg Polashock is a Real Estate Home Mortgage Loan Consultant and Certified Mortgage Planning Specialist with Cherry Creek Mortgage and resides in Castle Rock, in Douglas County Colorado. He can be reached via email at Greg@GregIsFinancingSolutions.com, by phone at 303-887-0672 or on the web at http://www.gregisfinancingsolutions.com/.
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