Category: Market Observations
Posted: 9/20/2013
The price is still right but for how long?
By John Dixon
I don't know of anything that'll get a person in trouble faster than overpaying. In the mid and early 2000s, that nailed a lot of developers, builders, real estate investors and individuals who chased real estate at insanely high prices fed by easy credit and lax lending standards.

Any seasoned real estate investor will tell you that you make your money when you buy the property. And for the people who bought at the wrong prices, the music stopped. Credit dried up in the crash of 2007, and those who'd gotten carried away were under water on their mortgages. Foreclosures followed by the thousands, and at John Dixon Associates, we've been selling those properties ever since – at a fraction of the previous prices.

Now I think we're looking at the flip side of this cycle. Foreclosures have dried up to a trickle, and those inventories of bank-owned properties are shrinking fast. That means a window of opportunity is beginning to close for developers, builders and individuals alike.

It's a double-sided opportunity, really. Just as the supply of foreclosed property is beginning to diminish, demand is set to surge. Unemployment has dropped from its 2009 peak of 10 percent all the way to 7.3 as of the August numbers. When people have jobs, they start wanting houses, and we're seeing just that: Sales of existing homes in August were at their highest level since … 2007.

Aah, 2007. The Crash. Even now, almost every headline about the economy includes the words “since 2007.” Highest home sales … since 2007. Strongest stock prices … since 2007. You get the idea.

We're still haunted by it. And that's not an entirely bad thing, as long as we learn the right lesson: Buy at the right price. A price you can afford. One that gives you some “headroom” to make money. A price at which you'll still be OK if interest rates blip up, or if the market hits an unexpected snag.

There's still good property available at the right price. Homebuilders are confident – but not dangerously so. The National Association of Home Builders/Wells Fargo builder sentiment is at 58 (anything over 50 is positive), and it's been steady at that level for about a year.

Meanwhile, interest rates keep ticking up. But they're still extremely low by historical standards.

Conditions are good, and improving. Prices are still a fraction of what they were … before 2007. But it's easy to see a time coming when the supplies will get short again, just as more families are ready to build or buy. When that day comes – and I suspect it's not so far off – folks will be wishing they'd loaded up at today's prices.

We'll be selling scores of home sites, as well as other residential and commercial properties in Georgia and North Carolina, in our Oct. 9 in Gainesville, Ga. Then on Oct. 22-23 we'll have about 100 offerings in Alabama, Florida, and Georgia.

As auctioneers, we'll be trying to get the highest prices we can for these properties, but I expect the properties will still sell at levels that will put the buyers in a good position to make future income and profits in the near future.

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