Real Estate: Now Is the Time to Buy Right and Buy Smart

Credit Suisse First Boston publishes what I consider to the the best monthly survey on the nations housing market. This survey is done through the eyes of on-site consultants that know the area where they work. CSFB then assimilates their own proprietary data to then arrive at a general and region specific report.

For the time period ending April 30th, here are general comments from this exhaustive document:

Buyers respond to low mortgage rates and prices, looking for foreclosures. Nationwide, there was increased buyer traffic in April,especially in beaten-down markets where buyers went searching for foreclosures and other bargains. The best markets were those with high levels of foreclosures (Ft. Meyers, Las Vegas, Los Angeles,Orlando, Phoenix and in the Inland Empire, California). However, these are some of the weakest markets for new home sales. Dallas and Atlanta were the two markets with the worst traffic during the month.

Lower mortgage rates and the first-time buyer tax credit generated significant activity at the low end of the housing market.

Home prices remain under pressure with some beaten-down markets showing movement towards stability. Washington and the Inland Empire posted the highest prices. Elsewhere, new homes are 30% more costly than comparable foreclosed homes, thus new home sales are lousy.

Builders continue to mention their concern about converting contracts into closings due to appraisals that often come in below the purchase price as appraisers use extreme caution - using foreclosures as comps. In addition, foreclosures and short sales remain the toughest competition.

In short, the landscape for real estate favors investor pools snapping up homes and lots at bargain prices. The balance between new and existing real estate sales remains in a state of flux - regardless of what politicians are doing - and the light at the end of the tunnel may still be an oncoming train.

If you are an investor, these are the best of times if you buy right and buy smart.

Comments

[HardwoodFlo...:]

People are either going to buy a house because they want to or can afford it. I just don't understand this investment idea link your article supposes.

Sure, a house is a good thing to own. You not only get to live there but you pay into it, can improve it and as you pay it down you create quity for yourself down the road. Agreed.

The idea however, that now is the time becasue prices are down maybe tru but the reality of it is that people are going to do that when they have the means they don't need an article telling them "now is a good time to buy".

Just a personal thought.

May 08 03:06 PM

[Mad Hedge F...:]

Please take mine. The real estate tracking firm Zillow.com estimates that 30% of all US homes are now underwater on their mortgages, equivalent to 27 million homes. There is a “shadow inventory” of a further 30 million homeowners who want to sell their houses on the any improvement in prices. Newly tightened lending criteria have permanently knocked another 10 million potential buyers from the market. Some five million of the nation’s 90 million houses are either for sale, in foreclosure, or held in bank inventories. I have a question. With 72 million on the sell side, who is going to power the much heralded rebound in prices? It could be a veeery long wait. I realize there is a lot of double counting here, but you get my meaning. It all bodes for an “L” shaped recovery in the real estate market, which means no recovery. Keep that rental. No principal risk, no property taxes, and just a phone call unclogs the toilet.

May 08 03:19 PM

[Tricky:]

The thesis of this article is "prices are lower so you should buy". While a lower price is certainly a good thing, that doesn't automatically mean it's priced "right" yet. What are house prices in comparison to income and to affordability measures; rents?

May 08 03:46 PM

[Market Sniper:]

Word to the wise. Do not "buy" real estate, steal it. If you cannot steal it, you do not want it. A lower price from a previous price high is meaningless. If the property net cash flows and returns total cash invested within 36 months, it MIGHT be a purchase candidate. IF you want to be in the landlord business.

May 08 07:53 PM

[kozanack:]

Real estate in parts of Texas boomed during the oil price run-up that culminated in the early 1980s. Those areas also suffered a real estate drop following the collapse in oil prices in the early 80s. A cursory view of pricing data indicates that it took about 10 years for residential real estate prices to recover to their previous levels, and 15 years for raw land to recover.

May 08 09:14 PM

[Pcatlow:]

Picking a bottom will make your fingers stink. What a stinker of an article. Real Estate is not an investment unless you own multi-unit Apartments...then, those smart money folks know when to roll over.

May 09 10:16 AM

[mrresponsible:]

For me, and one time I owned 130 rentals, it was always the "art of the deal", like horse trading...it was in the buying, location, location, location, (where you can achieve some appreciation someday) and being young - holding-on a long time, and most important - working your ass off - consuming your life and taking huge risks as the market has spoken. I still own some rentals but finding good quality renters, now, is the real challenge and keeping expenses down!

May 09 08:26 PM

[Bestsolutio...:]

This dialog is great.Keep at it.Some really good points.
I am a real estate broker (20) years.
I believe real estate is a VERY POOR INVESTMENT
if it does not produce income.It is a WONDERFUL
FULFILLMENT OF A BASIC HUMAN NEED,SHELTER.

The "PHANTOM PROFITS" for a home owner over time are JUST THAT-Phantom!

EXAMPLE:

A young couple PURCHASE a home for $100,000.
Live in it ,maintain it for 18 years and life is good to them
they get to sell it and move on to a bigger better home.
SALE PRICE is $180,000.
NAR would say Real Estate increases!They made
$80,000 TAX FREE PROFIT.WIN,WIN,WIN.
Not So says Best Solutions FL.
WHAT IS THE REAL INVESTMENT?
The house had to be maintained,say at @ 2.5% a year
The house had to be insured,say at @1% a year
The house had Taxes say at 1.5% a year
AND there is the time cost of money...
If the house was financed at @ 5%/yr
(If paid for cash the loss of @4%/yr)
THE TRUE COST IF FINANCE IS 10% a YEAR
for 18 years.I will not dare compound that They would take my broker license away,it makes the time cost 180% which
equals $180,000 plus the purchase of $100,000
making it an investment of $280,000.
BEING SOLD FOR $180,000.

I repeat as a basic human need, GREAT,Wonderful.
The words real estate investment should not be allowed with the words income producing.

May 11 08:45 AM

[LarryG:]

Hmmm, Credit Suisse, aren't those the folks who leant more than $1 billion to now bankrupt developments (Ginn empire, Yellowstone, Promontory)? Not sure we should trust their judgment on the housing market any more than we should the National Association of Realtors. Hypemeisters all...

May 11 09:28 AM

[Bestsolutio...:]

Oops.
Last sentence should read:
The words real estate investment should not be allowed
without using the words income producing.

May 11 09:38 AM