Always A "Buyers Market" Somewhere!

Always A "Buyers Market" Somewhere!

It is a well accepted "truth" of the real estate market that the "market" is NOT national -- but it is regional. No matter what the national statistics are showing -- no matter how accurate they are -- there will always be "pockets" where prices are going up and other pockets where prices are going down. The "up price" areas do not much influence the prices in the "down price" areas. Fed Reserve Chairman Greenspan just added to this bubble burst concern, WSJ article saying:

Federal Reserve Chairman Alan Greenspan, drawing on new research he has personally supervised, said American consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback.

Mr. Greenspan's new data show that borrowing against home values added a stunning $600 billion to consumers' spending power last year, equivalent to 7% of personal disposable income -- compared with 3% in 2000 and 1% in 1994.

The Fed chief attributed that increase to declining mortgage interest rates, an increase in the turnover of homes, the popularity of cash-out mortgage refinancing and home-equity loans. Should mortgage rates rise, he told the American Bankers Association, turnover and borrowing would decline, consumer spending would slow and saving would rise. (Source)

The bigger truth is that there can be a "buyers" market or a "sellers" market for individual houses!

This means that a junky house will be hard to sell in the midst of nice houses in the same area selling quickly. In fact a house with unwanted features can always be in a "buyer's market" because so few prospective buyers see a value in it. I recently looked at a "nice house" that had a 17-car garage in the back of the house. The owner was in the antique car restoration business. The garage "floor pits" and overhead water and power services would not mean much to the average home-buyer!

And, a great house can sell quickly in a "down market" of "average houses."

It is certainly true that if you want to use a rent-to-purchase approach to real estate it will work most logically when MOST of the houses in some area have falling values, or at least not increasing values.

But, even if the local area has "mostly increasing" home prices and sales within a few days of listing -- there can STILL be some houses, in that same area, that are NOT selling.

And, "not selling quickly enough" to cover the owner's stetched-thin exposure to too many mortgage payments can turn ANY house into a bargain. It will be a bargain for the first guy who can put cash on the line in 10 days or less. That is pecularly true in the case of a rent-to-own deal. Or consider the house to the above left, with an ocean view. It may well appeal to a builder who has one of his construction crews not working and not appeal to many others. The owner of this beachfront property, perhaps having no good insurance, is selling in a "buyer's market" and might need cash for groceries tomorrow!

The investor with a very special need for a large multi-room structure, suitable for a dormitory for workers in his soon-to-be-built factory might be the ONLY person who sees the value in a waterfront location grand house despite its rundown condition.

If you are a "would be" buyer who can afford large monthly payments, but whose credit is not too good, you may not qualify for a home loan. On the other hand you could easily rent-to-purchase from a seller who sees the special appeal to your financial situation as a way of getting his top-listing-price, even if he has to wait a few years for the option to be exercised.

Incidentally, the typical rent-to-own deal I make includes the provision that the rental payments ONLY apply on the purchase price if the rent is paid on time. One day late means none of that month's rental applies to the purchase price. This is an excellent way to get a "good tennant" even if he doesn't have the best of credit ratings. With a renter who has paid a handsome option price and really wants to buy, the application of his rental payment to the purchase is a sacred thing.

He is handcuffed to the deal. He pays the rent before he pays the car payment!

He is also far easier to evict than a man who might owe you a second mortgage! These can and should be structured so that they are "win-win" deals for both the rental/buyer and the owner/seller.

Always A "Buyers Market" Somewhere!

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Federal Reserve Chairman Alan Greenspan, drawing on new research he has personally supervised, said American consumers have become enormously dependent on borrowing against their homes to fuel their spending, and that a rise in mortgage rates could trigger a spending pullback.

Mr. Greenspan's new data show that borrowing against home values added a stunning $600 billion to consumers' spending power last year, equivalent to 7% of personal disposable income -- compared with 3% in 2000 and 1% in 1994.

The bigger truth is that there can be a "buyers" market or a "sellers" market for individual houses!

And, a great house can sell quickly in a "down market" of "average houses."

It is certainly true that if you want to use a rent-to-purchase approach to real estate it will work most logically when MOST of the houses in some area have falling values, or at least not increasing values.

But, even if the local area has "mostly increasing" home prices and sales within a few days of listing -- there can STILL be some houses, in that same area, that are NOT selling.

The investor with a very special need for a large multi-room structure, suitable for a dormitory for workers in his soon-to-be-built factory might be the ONLY person who sees the value in a waterfront location grand house despite its rundown condition.

He is handcuffed to the deal. He pays the rent before he pays the car payment!

He is also far easier to evict than a man who might owe you a second mortgage! These can and should be structured so that they are "win-win" deals for both the rental/buyer and the owner/seller.