CA. Investing

7 Replies

Prices are so high in CA. That's what I thought last year so bought out of state. Missed out on some good opportunities here. Now houses are sitting longer and prices are dropping. What's the best strategy in CA. at this time.

Detchu

I really do not know anything about the CA market at all except for what I read on the internet. What I do know is that there has already been a HUGE influx of West Coast and East Coast cash into the Midwest. Seems a lot of investors are selling and 1031 exchanging into the great safe piggy bank of the "flyover states".

Recently, an investor that I know well was asked to go to L.A. for a REIA conference to talk with Southern CA investors about the opportunities that exist in the Cincinnati market. The conference had representatives from all over the Midwest set up each in a booth and Southern CA investors went from booth to booth talking with the different reps about their areas.

With that kind of proactive event going on, I would say that investing in CA for appreciation would not be the best bet right now. Investing out of state is difficult as well unless you can get into a triple net lease or a large enough commercial residential place that can afford full time management and still cash flow (the do exist in this part of the country).

Only if there was a way to sell short in real estate like you can do with stocks.

Hi,

I think that there are still areas in CA that will appreciate well.
Areas East of LA still have decently priced homes that will appreciate as the area gorws with people moving away from LA.

It's definitely not the same market though.

Adrian

Bryan, there is actually one way to go short on real estate. You can either go short the home builders like Toll Brothers or St Joe or you can short a Real Estate Investment Trust (REIT) or ETF.

Going short is highly risky and with REITs or ETFs, you may also be stuck with paying high dividends is you hold your short position for a long time. Buying put options could limit the risk to some extents while achieving much of the same results.

Hey Edge,

You won't find me shorting REIT's any time soon. There is just too many ways for them to creatively keep good numbers for their investors. The builder's might be a better short play though, if rates jump up as expected, they are going to be hurting for awhile as they adjust to the lower market demand.

its all about getting in and getting out QUICK! i wouldn't want to be a guy that has thousands of condos coming on line in a saturated market in a few years.

Although, i do have a hundred coming online in Hawaii in about a year. They are workforce housing with 20% affordable though, not high end stuff.

There is a definite shift taking place in the CA market right now. As I believe EDGE discusses on his blog, there has been a massive increase in the amount of loans defaulting beginning in 2006.

Be ready for the shift to go into high gear... as homes continue to sit... appraisers are having a tougher time finding comps within a 6 month period and having to go back as far one year. More and more people are already accepting offers well below their asking price and well below 1 year old comps. At this point more and more people are even taking neg am loans with no idea how to use them to their advantage (in the wrong hands these things are dangerous). Lenders know this is true and they perpetuate the issue by continuing to lend (because that's what they are in the business of doing). Now they are even introducing a 50-year amortized loan to perpetuate rising prices as long as they can, but the bleeding has begun and unless they come out with a 60 or 80-year amortized loan soon there will be no stopping the bleeding.