When we come across a market overflowing with two years’ worth of inventory supply, we’re sure of one thing: Real estate prices have hit their lowest. As supply increases across major cities in America, buyers can afford to patiently scout for the right investment opportunities. Gone are the days of fighting over a limited inventory. The number of available properties across major cities has given even more power to the buyer. Prices are low. Inventory numbers are high. It’s time to buy.
An abundance of inventory makes sellers eager to strike deals faster once opportunity knocks. In many regions, current owners of luxury properties are reselling their condos for 25% less, a prominent trend in preferred locations like Sunny Isles and Miami — particularly for international investors. Though the trend did bring lower prices, sales volume has increased over 50%. In Sunny Isles alone, supply has already dropped from 98 to 58 months due to competitive prices. Inventory is measured based on the average number sales in the last few years compared to the amount of available units. For example, if an average of 1,000 units were sold monthly in the last few years and 5,000 properties are available, we have five months’ worth of inventory. Per The Washington Post, “Real estate experts anticipate the housing market slowing down, but not stalling, with prices and mortgage rates moderating.” The current market is a vast field of opportunity for the real estate owner seeking to expand their portfolio.
But the abundance of inventory hasn’t stopped developers from expanding their existing projects. Most major cities in America are seeing new projects being built every day, creating a vast playing field for buyers, both old and new. Since the days of endless bidding wars are behind us, the buyer should also be thorough in research, leveraging their power as these new projects are built.
In the current market, I suggest practicing a technique my firm calls 100:10:3:1.
• Pick 100 properties in your desired search criteria.
• Out of these, visit 10.
• From the 10 visited, send a low offer to your top three choices.
• Negotiate a deal on the one offer accepted.
Selecting the 100 will provide ample knowledge of the market, giving you a stronger platform to choose the right property in the end. When you’re done, you’ll be able to pick the 10 that meet your search criteria the most. When visiting your choices, put your newfound information to use. Apply it to select three properties that most appeal to you and have the desired appreciation potential. The approved offer will already be at a lower price than the market (pretty incredible), which gives you plenty of room to negotiate. It will not only make it easier on your pocket, but will ensure the selected property makes a profit in the future.
There’s also good news for the first-time homebuyer, since everything happening at the top affects everyone else. They should jump at the current trend, scouting the market for the right opportunity while there’s time. This right opportunity can be defined as lower prices/high inventory: The first-time buyer will spend less on properties that would usually cost a lot more. Developers who are just starting out need the first-time homebuyer to step in and take a chance on their product. This also creates a great environment in which to negotiate closing costs and other fees.
Opportunities like these must be leveraged. When these “downs” happen, investors jump at the chance, since the real estate market always regains momentum. As these changes spread nationwide, those with the means to acquire property should consider research and opportunity. Like all trends, this is one to come and go. The time to invest in property is now. The big question is: How many will take advantage while it lasts?
In real estate, history does repeat itself. I predict the current buyer benefitting from price increases happening in the coming future. The smart investor will grasp the current opportunity, certain of profits.
Source : Forbes