WSJ Report on Real Estate Speculation

The Wall Street Journal reported recently (December 23, 2006) on the state of residential real estate speculation.

“Battler-scarred mom-and-pop investors are still dabbling in real estate. But they are changing the rules of engagement.
During the housing boom, many individual investors went deep into debt to buy investment properties — rental homes and condos — in hopes of selling quickly. The goal: Cash in on soaring prices. They may have had little or no intention of being landlords for the long haul.”

In short, big risks remain for investors in the residential housing market — the National Association of Realtors reported the median price of an existing home in December was exactly the same as a year ago, which marks the first stoppage in price declines occurred in the fourth prior months.

Nevertheless, there are several avenues for savvy, patient investors which are generally regionally specific.

• In Tucson, one realtor noted the increased interest in commercial real estate investment due to the frequent unrealistic asking prices of residential properties. He also mentioned the expectation of the property paying for at least the mortgage with 20%-25% down.
• In the Kansas City area, out-of-state buyers are taking positions in small and midsize apartment buildings.
• In Charlotte, investors are targeting raw land investment and developing it for builders.
• Many spots in Texas remain the lone hot spots in the nation with many out-of-state buyers continuing to invest in residential and other types of properties.
• In Tampa, several condo developers are offering a “rental-assurance” program which lasts as long as five years. One realtor noted this is an easy promise to make with so much inventory needing to be turned over and many developers are breaking their promises.