Monday, December 03, 2007

FUNDAMENTAL VALUES

Coastal Orange County Properties with Good Long Term Fundamentals are at a Temporary Discount Caused by Downward Pressure from Properties without Good Fundamentals. NOW AND 2008 MAY BE TIME TO INVEST AGAIN.


The majority of the homes and communities with good fundamentals have seen longer days on the market and price reductions not because they are worth less, but because there has been downward pressure by properties without good fundamentals. Many good properties with excellent long term fundamental value can be bought at significant discounts from sellers who have to or choose to sell in this buyers market.

COASTAL PROPERTIES WITH GOOD FUNDAMENTAL VALUES
In general, as I am sure you are aware because you own property here the desirable areas of Coastal Orange County values are driven largely by two factors.

1. Proximity to the sand – how quickly can one walk to put their feet in the sand?
2. Ocean Views – Can you see smell, or hear the ocean?

If you have both its oceanfront and the sky is the limit on price. These properties can usually only be afforded by people with upper tier wealth. The polarization of wealth has created an interesting real estate dynamic. If you simplify it’s fair to say that the people who own these multimillion dollar properties also own others and are less susceptible to the ebbs and flows of the market. They are vacation homes in Resort areas that will always be desirable; a good place to park money and enjoy.

Some owners upgrade and sell to buy nicer property at a discount, others don’t have to sell in a down market and won’t. Some owners are simply done with the property and some do have to sell. All scenarios create great buying opportunities.


PROPERTIES WITHOUT GOOD FUNDAMENTALS
A few miles inland there are many areas and communities that had values increase significantly in large part of the availability of low interest rate loans and close to no money down. Now these loan products have disappeared. The area is still attracting the same demographic with similar income only now they can’t afford it. The current owner is upside down – you know the rest. Short Sales, Foreclosures, a glut of properties on the market and they are all reducing the price to compete.

Concentrating in large part on these scenarios, the media with broad generalizations of the real estate market and areas of coverage creates massive uncertainty that even affects the psyche causing many buyers to sit on the side lines waiting for the sky to fall. This lack of action creates a buyers market for almost all areas and some good deals all over for those who are aware, particularly in areas with good long term fundamentals.


STOCK MARKET COMPARISON – FINANCIAL SECTOR
Another way to look at it would be to compare it to the current Volatility in the Stock Market, in particular the Financial Sector. While no one really knew what the risks were or still are, confidence was lost and the financial sector plummeted, very similar to how the confidence is lost in the Real Estate Market. The stocks that lost significant value were both stocks that had big exposure to the mess of subprime lending as well as the stocks that were good of good companies like Bank of America, Citi etc… The Stocks of these good companies were beaten up because of lack of the confidence of the sector caused in large part by the companies with bad fundamentals. Creating good long term buys because of it? I think so.


CHOOSING THE RIGHT STRATEGY FOR YOU AND STAYING INFORMED
Proper timing for the best tax advantages, 1031 exchanges, TIC options, adding to your portfolio or diversifying form it is important. Many sophisticated investors are now choosing to upgrade to that type property that was nearly untouchable 4 years ago because the market was so hot.

Whether you are interested in taking advantage of this Buyers market or not is always a good idea to re-evaluate you real estate holdings and your long term strategy for those investments.

I have included a Market Trend graph for your properties city as well as a couple of articles that I thought had some good information.

I believe you deserve to have current and factual information provided to you in a Private manner. Feel free to call me directly. 949-303-8911. Also this information and more can be found on my website at www.LawryRealty.com.