Flip or Flop That House

When everyone is looking to be in on the game you know something is wrong with the game itself - it means it's likely rigged or being manipulated by a select few unbeknownst to so many.  I've commented before about the housing market and the "frenzy" that is underway. Buyers are bidding up property values above list prices and trying to partake in the house flipping craze to make some money.  It seems every investor has a contractor and every contractor from a general to an electrician has become apart of the "flip this house" mania. 

Afterall, there's good money to be made on the flip of a house when you can be paid for your time and labor and make a profit selling at a higher price based upon the actual improvements to the property.  Investors love the above market returns on their cash particularly when there's no good alternatives (very few want to buy a longer-term CD paying less than 2% interest rate or invest in a stock market that has jumped 88% since March 2009).

Unfortunately for everyone playing the game right now, the inventory of "good" properties to be flipped (lower valued, fixers, REO's, etc.) has decreased dramatically requiring flippers to take a much greater risk on higher valued properties and/or bid up those newly listed good ones that fall upon the market.  It wasn't but a few months ago that there were 20 homes on the market well below $100K in a nearby remote community of Pollock Pines.  Today, there are only two available properties below $118K.  This is a trend consistent with most markets.

NAR recently reported that the national median home price in April increased 10.1% from a year earlier.  Of course, it's not just house flippers that are driving the market forward and up from what many believe (or hope) could be the bottom for this long housing market recovery.  Not only are investors looking to flip homes but they are jumping in on the rental market and buying investment properties.  Additionally, first-time homebuyers as well as seasoned homebuyers are taking advantage of these historically low interest rates and high affordability opportunities to be homeowners.  All seems normal one would think.

My only caution is be careful on what you're doing and have a plan (with some back-up plans to boot!).  Make certain you're not overpaying for that property based on selling it at an inflated value or anticipating fewer repair costs.  Remember, you make money on the "buy" price not the hoped for "sell" price.  And, if investing for the long-haul, make certain the property cashflows and that you're going to get a renter that cares for the property and won't take advantage of you upon a job loss or economic strain they experience.  Lastly, if you're looking to be a homeowner, buy for the utility value and the affordable housing cost (e.g., a standard of living that you can sustain for a long-time) not with the mindset "that house prices can only go up from here."

Remember, there are no guarantees that housing is on a longer-term upward trend especially with the economic backdrop that this country is facing at present.  I continue to believe deflation is the greatest risk and that makes housing a much less attractive investment for the long-haul.  It seems there is alot more flopping that is likely to happen before anyone flips for joy in this real estate environment.

Politics is Polarizing America

Okay, I promise not to make this another blog on the letter "P" although it would be possible! Last week, I attended my first rally and opportunity to lobby at the State Capitol on behalf of the California Association of Realtors(r). I've never before felt the need to actually help push forward "an agenda" at such a level of government.  It was always my belief that politicians are smart folks and they can decipher between what is "right" and was is "wrong" or what makes good sense for the people of the state or the country for that matter - that they have the capacity to rise above all of the self-interest, greed, economic waste, manipulation and trickery.  However, over recent years I've learned how naive I've been.

It's a very sad day in America when I feel I have to push an agenda for an organization in which I don't always agree with their political, economic and industry positions.  However, to actually get politicians to make the "right" decisions for the betterment of all, I'm forced to join the lobbyist bandwagon like so many others.  I need to be apart of the process to educate lawmakers and inform them of the "pros" and "cons" about proposed bills concerning homeowners and the real estate industry at-large.  It's not enough that they should do their own due diligence and decipher the risks, benefits and rewards for making the right decision.  No, because it's about the other side that is lobbying and pushing forth their rationale and agenda for a particular bill or policy that mandates influential action on both sides of the argument.

The lobbyist business in Sacramento is huge!  "Business groups, corporations and unions paid lobbying firms almost $42 million to influence state lawmakers in the first quarter of 2012" according to the Sacramento Business Journal.  Never before have so many competing interests been at risk by costly new regulation, less state resources and fewer tax dollars to disburse.  So, what you get is division among people that digs deep to the core of our beings...a threat to our own livelihood. Politics in America is all about self-interest and greed so everyone must fight for themselves or jump on the shirt-tails of others to save their way of life.  So, I've joined the "Realtor Party of California" until I run for governor to correct this wrong!