CALIFORNIA MARKET INSIGHTS
There is definitely opportunity in the real estate market in California
right now, although there are real issues. Sales have jumped
about 100% in the last year in California as large price declines
(close to 30-50% in some areas) make real estate look like a good
buy. And, the decline of prices seem to be near a bottom at this
time as sales increase.
But, an investor needs to understand their reason and exit strategy
before buying a piece of investment real estate. Are you buying
for appreciation or cash flow? I think that it is risky to buy
anything for appreciation right now. The market WILL appreciate,
but it could be a long time in many areas. Buying a
distressed property which is undervalued can be justified by the
“instant equity” in the property, as long as you can sell
it now and still make a profit, or afford to hold it until you can sell
it at market value.
A problem with California real estate is that values in most cities are
still relatively high which makes them difficult to cash flow,
especially with the 10% unemployment California is experiencing in this
recession. But, the reason for this is obvious. California
is a beautiful and desirable place to live. California, from what
I understand, also has landlord laws that favor the tenant. This
makes the “buy and hold” strategy more difficult and less
profitable. This is an issue anyone thinking about buying in
California should research further.
When examining current real estate prices for California cities, I see
several cities that seem to have a lot of value. Cities where the
average price have decreased between 30-50% in the last year and is now
in the range of $90 000 to the low $200 000’s. Some
possibilities are Oxnard, Santa Maria, Lompoc, San Bernardino county,
and outlying cities of the Bay Area such as Richmond. But, before
investing in one of these inexpensive areas, one needs to research
further the local employment, demographics, and other issues that might
be contributing to the lower prices. If the only problem is
oversupply and past overbuilding, then that might be an excellent
market to invest. Many of these cities in southern California
have a dominant latino population. This might affect rents in the
area, the types of industries present, and the desirability of the
neighbourhood for in-migration. It is important to research
thoroughly any city before investing in it.
November, 2009
Prices have been going up in California for many
months now, although some areas buck the trend.
San Bernardino
median price has increased by $10 000 last month, but still is very affordable
at $80 000. This area, the “Inland Empire” is also an area of forecasted huge growth
in the future.
Lampoc is also affordable at around
$182 000 median price, but further research will be needed to determine the
local job market and population changes.
July, 2010
California has seen a healthy 23.2% average price gain in the last year
(as of May). Two cities that I had recommended a year ago for
further research have seen dramatic increases. Richmond prices
have increased 75% from a year ago and San Bernardino 50%. Much
of these large increases occured since March, so it may be related to
seasonal factors and the expiration of the Homebuyers Tax Credit.
Prices may stall and decrease again, giving another buying
opportunity, due to an increased supply of foreclosure properties
entering the market in the near future and due to less demand with
the Tax Credit expiration.
Johnson Frais
PassionRight Properties
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