It Was The Best of Times. It Was The Worst of Times. The 2009 Real Estate Year In Review
I know my strengths and I know I shouldn’t be trying to quote classic literature. I am not a literary genius! So… I won’t… but do I have your attention? Good!
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Depending on your perspective, 2009 will go down in history for some individuals as the the worst year ever. Yet for others, especially if you are an active real estate investor, 2009 may have been one of your best years ever. Whatever the case, I thought I would use this space to capture some of the highlights of this past year, and offer my Karnac’s view of the coming new year.
I think all of 2009 can be summed up as one really big mess! We started, and ended, the year with a recession, more foreclosures, rampant and unchecked unemployment, more foreclosures, Government intervention in every aspect of the housing market… from bailing out Fannie/Freddie, to new appraisal rules, to expanding FHA loan availability, to the Homebuyers Tax Credit, and still more foreclosures.
This is the one year every investor needed a score card to keep track. For the experienced investors this year seemed like old times. Great deals, plenty of profit opportunities and very manageable downside risk. For new investors I saw a great desire to get involved in spite of tremendous fears of not understanding where the market was heading and how to take advantage of that momentum.
In every case, for those investors who stayed involved… this year turned out at least average… and those sitting on the sidelines… well, they missed some great opportunities.
So, as I sit here at the end of 2009, I would have to say for the most part 2009 has provided a wild and profitable ride.
And now we stand ready to usher in 2010. The start of a new decade with all the promise and potential it has to offer.
Here are a few of my predictions based on all the information I could digest for the coming year.
1. I believe unemployment, the current driver for foreclosures, will hang around the 10 percent level until the beginning of the third quarter of 2010. Expect foreclosures to continue at least at 2009’s pace.
2. The Government is determined to keep the housing market afloat. With that as a backdrop we know the Homebuyers Tax Credit is here until April 30, 2010. We know the emphasis is being shifted to quicker short sales and not neighborhood destroying foreclosures. We know the Treasury will do just about anything to prop up Fannie/Freddie, and support for FHA loans will continue strong. In spite of interest rates creeping up… home sales will be solid, at least on par with 2008, through the second quarter of 2010.
3. Lenders are sitting on billions in bad assets. As the “to big to fail” lenders pay back the Government the billions owed, they will have to start looking for other available cash… and the foreclosed inventory on their books represents that cash. Bottom line… expect an up-tic in REO deals starting in the first quarter of 2010.
4. "It's the economy stupid", is still the watch word for all of 2010. Within this very inconvenient fact is the realization that home ownership rates are going to continue to fall. This is great news for current and wood-be land lords. However, this is a double-edged sword. On the one hand the numbers relative to purchase price and attainable rents (positive cash-flow) are as good as they have been in years. The downside in some markets is that vacancies are increasing (or the time to lease-up is increasing) and rents overall have been trending downward. The one bright spot is Government Assisted Rents. For those with the stomach… this is where the real deals will be in 2010.
5. Current knowledge and proven approaches to navigate the coming year profitably are the game changers for 2010. To jump into the coming year without the right knowledge, the right advisers, the right team or the right tools will cause tremendous pain for those so bold. My prediction on this one… BiggerPockets will continue to grow and provide invaluable insight and assistance to all who ask. Use this valuable resource!
In closing I would like to thank Josh especially, for allowing me share my thoughts with each of you through out these past several months and to wish each on of you a very prosperous 2010.
Happy New Year!