Breaking Through the Clutter: Actions to Avoid Disinformation!
I don’t know about you, but I totally dislike the last two months leading up to a national election. The amount of dis-information and near hysteria almost drives me to drink!
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The constant and often meaningless noise coming from every direction makes it incredibly difficult to sift through what is real and what isn’t. And if you have been following any of my articles, you know that I rely on information from many sources to help me determine how the overall economy and the housing market specifically is fairing now and where it is heading in the near future.
And the amount of noise over the next two months is going to make this task very challenging.
With that as a backdrop, and in preparation for this article, I decided to go back and review a few of my previous articles to determine how those insights would apply to today’s market.
I found two that I think stand the test of time and still provide meaningful insight that you can use now!
The first article focused on Supply and Demand and was written in early April, just before the Homebuyers Tax Credit was set to expire. A few of the take-aways from this article which are directly applicable today include…
- You had better be prepared for a downturn in demand (assuming the Tax Credit isn’t extended again) starting mid-2nd quarter 2010, and continuing until the unemployment rate drops below 8 percent.
- If you have been deluded by your market or a real estate agent into believing prices are going to move upward, WAKE-UP and pay attention to what is happening around you! Prices won't go up until employment rates increase and the overall inventory (shadow and otherwise) decreases. Do you know what your absorption rate is in your market?
- At the risk of sounding like a broken record, some of the best buying opportunities are ahead of us, not behind us. If you have dry powder (cash for your deals) be ready to use it; if you don’t have dry powder, now would be a great time to learn how to find some!
The second article was written in late March of this year, and the primary topic was: Are we going to experience a “double-dip” recession? Based on the all of the chatter coming from everywhere that question seems to still be unanswered. However, I believe many markets will experience this so-called double-dip. With that as a backdrop, here are a few points made in that article.
The housing market in most areas of the country has not stabilized. As an investor you need to understand where your market is and how much more of a decline is anticipated. Below are few things that will help you understand where your housing market is and where it might be heading.
- Look at your local economy and the strength of your areas employment numbers. Are they going up, down or have they stabilized.
- Determine the number of mortgage delinquencies in your area. The higher the number of delinquencies, the higher the probability that more foreclosures are on the way — with the effect being declining property values.
- Know and understand how long properties are sitting on the market and what the local absorption rate is. If properties are sitting longer or the absorption rate is increasing, you can anticipate continued value declines.
- Develop an understanding of your local rental market. Know what is happening to rents and the vacancy rates within your community. Declining rents and rising vacancy rates only support further declines in property values.
All of these recommendations are things that every successful investor should be doing. The “New Normal” dictates that sitting on your past accomplishments won’t get you a darned thing except maybe a few painful loses. However, following these recommendations will allow you to better position your business to be in the path of your market — not to get run over — but to maximize your profits.
Now is not the time to get squeamish. Learn what is going on in your market, develop/revise your plan accordingly, execute with purpose and reap your well earned profits.
Best of luck!