Monday, January 5, 2015

What the market looks like for 2015

What the market looks like for 2015:

The market continues to slow and it looks like sales volume keeps dropping. Sales volume collapsed by 6.1% in November as reported by the NAR.  We are playing a game of chicken with Sellers not lowering prices and buyers not raising bids.  Sellers are not taking to kindly to this high stakes game and have begun to pull houses from the market or waiting to list them.  Spring should be very interesting, as we will see Sellers decide to start to list homes or else wait another year to sell. Those that can not wait will be forced to sell.

New home permits continue to be dismal in historical terms.  Builders need to step into the market but they are still feeling the sting of the 2008 great depression. At this point builders are only taking on projects one phase at a time.  The one bright spot is apartment construction, which was very steady in 2014. 

Investor competition continues to drop in the SFR market as cash purchases dropped to 25%.  Overall it looks like Institutional Investors have been signaled to exit the market.  This will leave the professional in the game and give us some breathing room.  I would be looking for Institutional Investor that bought at above $200,000 to begin to sell since price appreciation has slowed. If inventories in high dollar markets begin to rise dramatically then this may be the reason and should help buyers.

The one wild card in the real estate game is Oil.  Nobody predicted that Oil would stay this low for so long.  This will impact every market in the world and has created debt detonator that will force liquidity.  Those entities that have poor balance sheets will be forced to sell. I do see the OIL SHOCK reaching into the real estate market since so many banks and institutional investors have real estate assets.  Banks are a little more protected with the passage of the last Government spending bill that protects derivative losses ( search; Jamie Dimon himself called to urge support for the derivatives rule in the spending bill) but I do feel even they will be forced to raise capital.

In closing 2015 will be a great year for wholesalers and Birddogs with many people needing to sell.  Much more so than 2015.  As the 2008 great depression continues the economy keeps trying to gather its footing. Each time it does something always comes up to knock it down. In Real Estate terms 2015 should be a much better year for property investors with interests rates so low and so many new opportunities to find deals. 

Good Luck and happy hunting.

Daniel Valle.
The Capital Mercantile Exchange.