November 19th, 2012 2:03 PM by Gregg Mower
California home values may have turned the corner from going down to increasing. This can be attributed to many factors. The single biggest factor has to be speculation. California has always lead the country in Real Estate Values and when the markets dipped to the point that it made sense for investors to start buying Real Estate in California they have come in droves. In the early part of the century Real Estate was hot with a good economy and money easy to get people were buying in California with the hope or with misguided optimism that Real Estate will continue to go up in value continuously. When Big Banks realized that they were borrowing on borrowed funds the bottom fell out the Real Estate Market and those that were hoping for a quick buck in turning Real Estate ended up losing the house. Foreclosures and a market that kept on a downward spiral was the norm. Today with extremely low interest rates those investors that have been on the sidelines with their money are coming back into the Real estate market realizing the other component to Real Estate, RENTS.
Investors have come to the realization that with the low cost of Real Estate and a good steady demand for housing that Rents have stayed high. Rents can be used to increase your Return on your Investment (ROI). In the past Investors looked to the rising value of Real Estate as their ROI, now the investor can leverage their money by taking out a loan on a property and still have good cash flow. By leveraging the Real Estate Investor is now able to purchase more properties with less money and still maintain a good return on investments. This now has been seen by Wall Street as a viable investment strategy and big mutual funds are beginning to buy up Real Estate where they see a high ROI. They have identified the central valley of California as one of those places. In Sacramento we are seeing giant funds coming into the market buying good homes at full price and renting them out and making a great return for their clients. This has a twofold effect; one is that by creating a high demand and reducing the supply of homes the prices are beginning to rise again as inventory diminishes. Second we are starting to see the value of building new homes again which is generally good for employment and the local economies as a whole.
Is it a good time to buy? From an economic point of view now is finally the time. We have seen the bottom of the market and now we are on the rebound. In the larger markets such as the San Francisco Bay Area and in the Greater Loa Angeles area they have seen this already and the markets are now starting to rise again values. With housing the driving force of the economy in California it has become a seller’s market again. Not to say that there still are not great deals out there because there are. The economy is not great at all as whole and when people lose their job and have to move then you will find homes that have to sell and are priced to do so. The prudent Real Estate buyer has to be on the lookout for such deals and should be willing to put some work into a house to gain value relatively quickly. Small investors buying one or two houses at a time should be aware of those types of deals as well and be willing to fix up a house to see a gain on value.
So you know this and want to get started either as a first time home buyer or an investor and want to know how. Well the first step would be to be to talk with one of our Licensed Mortgage Professionals at MAE Capital Mortgage Inc. We will analyze your financial situation and be able to advise you on how much money you will need to purchase a home, and what other qualifications you will need to have to either be a first time buyer, a move up buyer, or an Investor. I would always advise to make sure you have a roof over your own head before you try and become an investor and always look at your first home as your first investment. However, you should look at any house as an investment whether it is your first home or your 20th home. The same factors in Real Estate apply no matter what type of property you are buying and we can walk you through those basic factors such as location, price and potential. Today we live in an interesting world where we may not know where we are going day to day as a country but we do know that we can’t make more Real Estate and there will always be a demand for good quality housing.