I’ve long held the belief that if buying property with a mortgage one should buy before bottom, and if buying cash one should buy post bottom.Now no one can time it perfectly but if the aggregate numbers are looked at then I believe on average this will occur thanks to free market forces. So when cash buyers peak I believe we will finally be in recovery mode. Is there any graph/numbers out there that show percentage/actual numbers of cash buyers?
“Buyers paying with cash accounted for 31.3 percent of May home sales, down from 32.2 percent the month before and up from 29.2 percent a year earlier. Cash purchases peaked at 33.7 percent of all sales this February, and since 2000 the monthly average is about 15 percent.”
We MAY be in recovery. But as long as you can get the cap rate you want from a property/have it cash-flow decently or break even after mortgage, who gives a rodent’s bee-hind about recovery status.
De-rate the rent by 20-25% to account for vacancy and future decreases (rent right now may be a Bubble) of course.
You still need to look at who those cash buyers are and what their goals are. Properties were cash-flowing positive a long time ago in many parts of the country, where home prices are so much cheaper, and a 5-10% further decline is not calamitous anyway. I think you’ll find yield chasers comprise a healthy portion of those cash buyers, and they won’t all have the luxury of waiting for an uptick in prices.
You only know you’ve hit bottom after consecutive months of appreciation, discounting any seasonal blips. This market is going to be harder to tell when that happens, since we’re probably in for a long flat period, which doesn’t signal a recovery necessarily, but that the worst is over.
After thinking about it a bit, I think the media focuses on unemployment when talking about the economy. Although that aspect affects many people. I don’t think it is 100% necessary for unemployment to go down in order to enter into recovery mode. I think once those jobs are gone, they are gone, don’t think they will be coming back any time soon. So anyone unemployed should either start their own business or get a job that can’t be exported or be filled by H-1B visas.
.
