The Eye of The Storm

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You not be hearing anything new if I mentioned that our economy in general and the housing market specifically have been going through some tough times.

In fact, in the past couple of months I have written about the “Perfect Storm” that seems to have enveloped our entire nation at least twice.

The convergence of historically high unemployment, run away Government spending, continued and unprecedented high foreclosure rates and the specter of increasing inflation is putting a tremendous amount of pressure on our economy all at the same time.

I could continue to go down the path of lamenting the challenges of this “perfect storm”, but in keeping with my focus to find the positive in as many scenarios as possible I believe that we may be entering the “eye” of this storm.

Consider the following…

1. The world markets got the crap scared out of them when Dubai essentially defaulted on a very high number of loans… telling their lenders that they would not be making interest payments for at least 6 months.  The result of this default has driven risk-averse companies and individuals into traditional safe havens, and one of those safe-havens is US Treasuries.  Specifically, the ten (10) year Treasury note.  The effect of spooked investors moving to “safe” havens has been to drive down residential mortgage interest rates. 
2. Since mortgage rates are at their historic lows, as of this writing they were at 4.78%, the “affordability” index moved, such that more homeowners can now afford higher priced homes; or for many first-time home owners they now can qualify to make the payment on a loan.
3. The Home Buyers Tax Credit has just been extended and expanded.  This continues the window of opportunity (through April 30th 2010) for real estate investors to purchase, renovate and sell homes to buyers looking to take advantage of this credit.
4. The continued high rate of foreclosures continues to provide a great number of quality deals to real estate investors and I predict that this trend will continue for the foreseeable future.

As with all storms, the “eye” is the calm, and is also comparatively small relative to the rest of the storm.  The significance of this to real estate investors is that I believe this “eye” presents a window of opportunity (5 to 6 months) for investors (rehabbers specifically) to do extremely well. 

Let me explain…

For Rehabbers: the next 5 – 6 months offer tremendous opportunities to renovate and sell your properties to home owners.  A steady supply of well priced deals (foreclosures), incredibly low mortgage rates with the possibility that they will continue to decline, many first-time and other home buyers, and the Home Buyers Tax Credit all are working in your favor.

For Wholesalers: your target audience, rehabbers, will be so busy renovating their current properties that they most likely will not be able to find an adequate number of deals to support their 2010 goals; this is where the opportunity lies for you.  Finding deals for rehabbers so they can continue focus on their core business will keep the money rolling in.

The bottom line is, while we are in treacherous times indeed, for those willing to take calculated risks, this “eye” presents timely opportunities not seen in the past 2+ years. 

Are you willing to take those risks and reap the rewards?

Photo: CoreBurn

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.