2014 Zillow Market Predictions

Dallin,

Great advise you have giving from Zillow but one thing I would have to disagree with is qualify for a loan this year will get harder not easier. I have ready many articles pertaining to this because of the fact the government is not pumping money into the economy anymore and therefore raising interest rates and want to make sure people can properly qualify for the loans they take.

Thanks,
Shah Ali

Thanks For responding Shah. Fortunately in this instance, I can say that I was not stating any of my own opinions, merely providing information that zillow has reported. I certainly see your point on this matter. Despite the fact that Obama has made pleas to lenders to loosen their standards, if the government is tightening their own requirements, it is unlikely that banks will go the opposite direction. Just one of those counter-intuitive ways that government thinks--do what we say, not what we do, I guess, right?

Guess we will see in the New Year!

Thanks for the information Dallin. I'll be keeping my eye on things.

I love opening things up for people to share their own thoughts or predictions. It's that time of the year, it's brand new, and time to look ahead and make our plans.
So if any of you have thoughts you would like to share, or some knowledge about specific marketplaces that you think would be helpful in directing people either toward, or away from, a particular area, I invite you to share those things here.
I have found my own city, Salt Lake City listed on two separate lists now as a predicted top performer for 2014. I will, of course, be monitoring that, and will provide updates on this and other cities as I become aware of them.
Now, I realize that in saying this, I have automatically created, in some people's minds, a resistance to sharing this kind of information. And I want to address that here.
It is very unhealthy to operate as a real estate investor, out of fear. Fear of competition, fear of not enough deals, etc. That fear will have an adverse effect on your investing and success. It will cause you to have unhealthy attachments to properties and outcomes, because it is representative of a scarcity mentality. Successful people realize that there is plenty of wealth and opportunity to go around. I was taught at the outset of my investing career that "Deals are like buses, if you miss one, wait 15 minutes and the next one will come around the corner." I wholeheartedly believe this to be true, so the idea of sharing with others about opportunity is a natural part of that, and will actually grow the opportunity to larger proportions.
If an area is doing well, additional interest and dollars coming to that area will make it do better. If an area is not doing so well, additional interest and dollars coming to that area will also make it do better.
So I encourage you to share--your predictions, your hot tips, your market opportunities with others--it will enhance not only your attitude, but your success as well.

ARV 90k rehab 15-20k under contract for 35k...

I predict "good rental" $700-800 mo.

HOW would you contract this one?

Assignment
Buy and ?
L/O

Aaron

Aaron, this is just my opinion, but the more money that needs to be put into the property for rehab, the less time I want to own it. $15k to $20k in rehab disqualifies this property, for me, as a Lease Option, I'm typically not going to do more than cosmetic at about $1k or less if I intend to do a sandwich lease option, the expectation is that the property is ready to go.
Running some quick calculations, it looks to me as though this property would make a good assignment with a potential of $8k to $10k as an assignment fee, which would allow the cash buyer with a good profit as well. If you were to purchase the property, rehab and resell, it could produce a good return also.

Im thinking about buy-rehab-resell,if it doesnt sell hold for cash flow.
Its in a good rental area and I can always get my money back through financing it.
The big thing is, this would be my first rehab and it scares the bajeebeezz out of me lol.
My team is set up for assignments not rehab, this would be a big step for me, I know I can do it but scared!

Aaron

"If your dreams dont scare you,then they are not BIG enough"

This response is directed primarily to Aaron's question above, but hopefully will have merit for others reading.
We typically start people with wholesaling because it is very low risk. Most investors reach a point where they want to take on a bigger challenge, which includes greater risk. It sounds like you are at that point.
Running the numbers for yourself is no different than running them to wholesale the property. If the property makes sense based on the numbers, and you have a Plan A and a Plan B exit strategy (and possibly a Plan C, which could be doing a lease option), and you have lined up the connections for your rehab team, then it seems to make sense to proceed.
Due Diligence should include:
1) Thorough Physical Evaluation
2) Title, Tax, Lien Evaluation
3) Checking with City Planning and Zoning and Code Enforcement for any issues on file regarding the property
4) Confirming rehab numbers and plan with contractor

These items, as you know, are done during the contract period. If your due diligence supports your decision, go ahead and close.

Growth does not take place without moving outside our comfort zone.
Carefully prepare for what could be big and costly problems with the project, and don't sweat the small stuff.
You can only really know you're alive when you overcome your fears--it's exhilarating to do scary stuff!

Hope this helps. You'll do great!

I ran my numbers, I checked and double checked everything talk to neighbors(they wanted to rent it) listen to DG family it was a go!
BUT!!!
It took me so long to talk myself into doing my first rehab because of fear and doubt and family matters that a cash buyer came in and did the deal and left me in the dust!
I have learned something, when the numbers make sense DO IT and do it fast because someone else will!!

Dallin didnt mean to change your thread on predictions I should of posted this on your other post "getting unstuck".

I will get a rehab under my belt!

Aaron

Aaron, I always enjoy communicating back and forth with you. And I'm sure you know at this point that you often inspire me to share something that is not really directed back at you, it is more an encouragement for everyone on this forum.
You said, Aaron, that you learned something from this experience, and that is to run the numbers and take immediate action. I want to reference the idea of learning lessons.
My personal philosophy in life is that there are only two reasons for doing something: 1) For Enjoyment; 2) For Learning. These are the two underlying reasons why we do everything. Even love, ultimately is a stimulus for enjoyment and learning.
That means that when something is happening in our life, if we are enjoying it, we usually don't question what is happening. But if we are not enjoying it, there is only one viable question to ask ourselves: "What am I learning?"
In our investing, there are going to be some good enjoyable experiences, but there will also be a huge amount of learning.
I had a conversation yesterday with someone who entered the program, and jumped immediately into doing a fix and flip on a rural property with acreage and barns, and also with the intent to subdivide the land as a way to make an additional profit. Without going into additional detail, that person is in over their head, and struggling financially. They made the comment that the program did not prepare them for what they were going to encounter.
This conversation was not the time for me to say what i really wanted to say to that student, so I am going to say it here:
"Learning works best when it is step by step. There are many reasons why we teach wholesaling as the initial method of real estate investing. Most importantly, it is very low risk. But it also teaches skills like evaluating properties, working with agents and sellers, protecting your assets, negotiating, and managing teams of people in an environment where you really cannot get burned. When you leap several levels above wholesaling in terms of risk, requirements, skills, etc., without having the foundation of your learning completed, the likelihood that you could have a very negative investing experience becomes a high probability."
Whatever your circumstances, as a real estate investor, you are going to be exposed to learning, and to risk. We cannot grow without experiencing risk, but we can manage it to some degree by our choice of the things that we want to do.
I encourage everyone to take some risks, that's where the learning, and quite frankly, the real money are located. Take it step by step, when you decide to do your first rehab, make it a light/minor rehab, what we call a paint and carpet job. Make sure that you have done some wholesale deals, and become good at evaluating properties so that you can cherry pick a good property to begin with. Don't expect your first rehab deal to make you rich, you're learning, and you're going to have some cost overruns to deal with. But you will learn a lot, and each property will become an opportunity to refine your processes and become better at making money with this strategy.
The same thing is true of buy and hold. Don't expect everything to go smoothly, even if you bought a turnkey property. You're a landlord now, and everything under the sun can happen. Sometimes you lose a little money on a property until you really get things down. I would hope that you realize that there is always a cost for learning, but it is worth it in the long run.

As my first mentor used to say: "Expect Anything, Be Surprised at Nothing, and you will be Prepared for Everything!" (Kessler's Motto)

Entering into 2014, Trulia posted their Top Ten Undervalued Metro markets. The accompanying chart also shows their 2013 value changes. For those entering the remote investing mode, compare these undervalued markets with one of my other postings that shows the difference in costs to own vs. cost to rent. There are a few notable inclusions on both lists.

Top 10 Metros Where Home Prices Most Undervalued

Area/ % Undervalue/ 2013 Change

1 Cleveland, OH/ -20%/ 6.6%
2 Akron, OH/ -19%/ 2.9%
3 Melbourne, FL/ -19%/ 8.6%
4 Dayton, OH/ -18%/ 4.5%
5 Toledo, OH/ -18%/ 6.1%
6 Lakeland, FL/ -17%/ 14.7%
7 Detroit, MI/ -14%/ 24.5%
8 Jacksonville, FL/ -14%/ 9.3%
9 Hartford, CT/ -14%/ 1.3%
10 West Palm Beach, FL/ -14%/ 7.7%

In an attempt to continue to provide information from a variety of sources regarding the marketplace for 2014, here are some predictions from Kiplinger. I especially enjoyed the unnotable comment.

What's ahead
In 2013, a sense of urgency drove traditional buyers hoping to take advantage of still-affordable home prices and historically low mortgage rates. Buyers found selection limited and were often forced into bidding wars with investors and other buyers who paid cash. Sellers reaped the rewards in terms of quick sales, often above the asking price.

Are there signs of asset bubbles across the U.S. economy? Fed Chair nominee Janet Yellen says some real estate markets are seeing private investors come in to invest often with all cash. "These are some of the hardest hit markets," she says.

Almost half of the cities tracked by Clear Capital experienced double-digit increases in home prices, led by Las Vegas, with a gain of 32 percent. Such spikes reflected a continuing "correction to the overcorrection," says Alex Villacorta, vice-president of research and analytics for Clear Capital. Buyers and investors rushed in to snap up homes with prices that had fallen too far. Homes continue to be affordable, despite recent run-ups — on average, prices are still 31.5 percent below their 2006 peak. The percentage of monthly family income consumed by a mortgage payment (assuming a mortgage rate of 4.1 percent) is just 15.6 percent, on average, compared with 23.5 percent in mid 2006.

"Houses are very cheap," says David Stiff, principal economist at CoreLogic, a property and mortgage-data analytics company.

Market observers agree that home prices will rise in 2014, but at a slower, more steady pace compared with historical trends. Clear Capital forecasts that home prices nationally will rise by 3 percent to 5 percent in 2014, about the historical average. Kiplinger expects an increase of 4 percent.

"The most notable thing about 2014 will be how un-notable 2014 is," Villacorta says.

Meanwhile, the Conference Board, a nonprofit association of businesses, found that the percentage of consumers who intend to buy a home in the next six months was the highest since 2000. Adding to the push: pent-up demand among young people who, hampered by lack of jobs or insufficient income, have been living in their parents' basements or sharing apartments with roommates. Celia Chen, a housing analyst with Moody's Analytics, says Moody's expects the economy to expand enough in the coming year to enable young people to begin moving out. They'll probably rent first, but low vacancy rates and higher rents will prompt some renters to move on to homeownership.

As home prices continue to rise, more owners who had been underwater — meaning that they owed more on their mortgage than their home was worth — will emerge from the sidelines and start selling and buying homes. CoreLogic reports that almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid 2013. Nevada, Florida, Arizona, Michigan and Georgia have the highest shares of underwater homeowners.

Thanks Dallin I always look forward to your post.
I would have to go with learn your area first. Its good to keep an eye on other markets but learn whats right in front of you before venturing out,just for the learning factor.
A lot of calls I get are from people wanting to buy through owner financing,they are the folks that lost everything they had because of the downturn in the economy and they are starting over, this was why I started looking at L/O.
I would have to say in my area 2014 is the come back for people wanting to get back into a home of there own whatever way they can!

Now is the time!

Aaron

Aaron, I would certainly agree with you on learning your own area first. There is an old saying: "Bloom where you're planted." I believe that the important message in that saying is that there is opportunity wherever you happen to be. One of the most valuable skills any entrepreneur can develop is the ability to recognize opportunity and quickly take action.
Many people, for whatever reason, want to invest remotely. For those people, I would say that the ability to recognize opportunity in the remote market and quickly take action is no less valuable than in your own area. Without that skill, a person can go broke in a gold mine. With that skill, a person can grow rich in a manure pit.
I remind everyone that deals are not found, deals are made. In order to find someone to make a deal with, we must have a seller who is both motivated and capable of being flexible. Those people exist in every market. If you are not finding enough of them, you have too narrow of a marketing approach. Broaden your approach to include more ways of finding properties that are not so much in the mainstream.

My daughter who is 21 made a comment when I brought up her buying a house of her own, I wanted her to experience renting first and yes falling flat on her face so daddy could pick her up and help her try again! Firm believer in learning from mistakes!
Her comment was, "everyone says its not good to buy right now because the economy still sucks"! I asked her why do you think that, she said know matter what they say good or bad things dont change that fast its going to be bad for awhile.
I know her and her friends can only see the world thats right in front of them but it had made me think, her and her friends have other friends all over the states all thinking the same thing, they dont believe what they read or hear because everyone has a different thought on this!

As an investor, I would like to change their minds and help them all feel the dream of home ownership, I want to help everyone that wants a home of their own and live the dream!

I would also like to ad, what a networking this could be through our young who already network and have all the contacts to help them and us, think about it!

Think outside the box!!

Aaron

I agree completely. I've had an interesting experience co-raising my daughter with my former wife and her replacement family that is very regimented in their thinking. That family lives firmly in the job world, and complains about what they cannot control. I live in an entrepreneurial world where a set-back also holds the promise of opportunity yet to be discovered.
Whenever my daughter has been with me, I've involved her in my investing and the two other businesses I operate. I wondered if any of this was sinking in.
Now, at age 25, married, and expecting her first child, she has recently started one business, and is now looking at another business to go along with it.
I believe that our best way to involve the next generation is to determinedly pursue our own entrepreneurial success, never letting our stumbles along the way to prevent us from moving forward, and to involve our children in that process. Offer, but do not force them to be involved.
And most importantly, and this was the point I was wanting to get to with this entire post--LIVE AND TEACH OUR CHILDREN THAT OUR PERSONAL ECONOMY DOES NOT HAVE TO BE REFLECTIVE OF THE GENERAL ECONOMY! Some of the greatest fortunes in the U.S. were started during the great depression. Thanks, Aaron, for your insights, I hope people are reading some of these posts, we all learn so much from each other.