High inventory deflation real estate
Low housing inventory
Right now the inventory is really low in real estate in almost every market and real agents have 5 to 10 pre-approved buyers in line ready to write a purchase agreement on a home.
Many are for over asking price, with inspection and appraisal waivers. It’s a hot market right now and it’s a sellers market at the time of this writing because there are just many fewer homes than the demand for home buyers.
There are many theories on this, but a couple are that people are aging in place and another is that people don’t want to slow their home due to the fear of covid.
So not many are listing, and because of that listed homes can get 30 offers and be sold in hours or days.
Eventually they will remove the foreclosure and eviction moratorium and as the interest rates go up fewer home buyers will be able to qualify for a home loan based on today’s prices.
This will create a tighter lending environment and one where the inventory will rise, putting homes on the market for Much longer, such as months, and as the homes sit they will increase the overall inventory.
Housing inventory rises
As the inventory rises the fewer buyers will have a lot more time to shop and get pickier. The buyers will realize that we may be in a deflationary market and wait for the home sellers motivation to increase then wait for prices to quickly fall.
Once we get to this point, as investors, we have a lot more homes to choose from so we can demand the price and terms more with more negotiating leverage, especially on motivated homes.
With today’s extra low inventory it’s hard to believe that inventory can rise. Another reason inventory has been low is homeowners haven’t wanted to list and sell their homes because they are afraid of all of the people in their house with covid.
As the economy starts to open back up people will list their homes and prices will rise and their will be fewer multiple offer situations.
Competition of more listings, especially on vacant homes, or where homes need to be sold quickly will have to cut their prices.
When the inventory picks up my investors will he negotiating seller financing deals and a few cash discounted deals. With so much inventory actual cash and time will be scarce so we will have to be very choosey in which sellers to negotiate with and which homes we will be interested in.
I have the ideal properties as:
free and clear, freedom and clear water homes
This means homes near beaches, with great night life, lakes, rivers, oceans, high tourist locations, and very warm climates.
Not every property owner who owns these high-demand areas will be motivated at first, but when they own the property free and clear it makes negotiating a win-win easier for my investor partners.
0% seller financing is preferred and turning then into Airbnb or doing house hacking is an ideal strategy.
So what will separate the nearly 33% to 40% of homeowners who own their properties free and clear?
Well if the location is very nice that will narrow it down who we will talk to.
The property owner should have a growing and compounding motivation to have someone take over payments and receive cash and or cash flow.
The property owner had Deferred or delayed on many things such as these below:
The property owner has deferred maintenance or delayed updating the property for decades and doesn’t have the time or money to pay or manage contractors and it’s not a property that can be listed with easy bank financing for the next buyer.
The property owner is aging and their health is taking a toll on them, and medical bills could be piling up making them go bankrupt soon.
covid-19 and any new strains has you the home owner worried that vaccinations may not be enough and you have considered assisted living or a nursing home or downsizing to a home with no steps, one-level living or living closer to your kids.
With capital gains, income taxes, moving for better tax breaks, deferred taxes, a big tax it, or depreciation recapture you’ll need to be smart about how you sell your property on terms.
Many times as the seller you get behind on property taxes and fall behind for months or years and the county in your state can take back the property from you.
Enough months, empty bedrooms, tenant damage and vacancies, you can really lose thousands of dollars fast if you don’t hurry to sell your home and let someone else manage it.
Sometimes you find yourself with a small home Loan, in foreclosure , in forebearance, or behind on mortgage payments, so you need to get out fast of your monthly payments and sell
With these eviction moratoriums and vacancies you are a burnt out landlord who seen missing thousands of dollars i. rental income and it’s caused liquidity issues and you are stressed out and need to sell your property.
Many of the property owners out there are way behind on emergency savings, retirement savings, and 401k funding, and you need an income stream from selling.
Your future of employment looks uncertain at your age and the technology world or work force has replaced your need and you aren’t making income and need to sell to get some income in.
A death in the family, siblings and probate is a reason to get that house sold for payments or equity, to just be done with that inherited house.
divorce can cause many to feel the need to force a property sale and split up the property. It’s a tough situation and will require some help selling so that everyone is happy in the transaction.