Potential profit making REO purchases still exist, but be careful!!
Even with the recent halting of a limited number of foreclosure proceedings by some of the biggest mortgage lenders in the nation, over fears of possible defects in their file documentation and foreclosure procedures, foreclosure action is heating up.
Meeting rooms at convention centers are becoming the sites of distressed-property auctions, with buyers competing for properties sometimes only based on an exterior photo.
Many first-time investors are jumping in, hoping to ride a wave of increasing home values.
And there is some good news on that front. According to the Zillow Home Value Index (www.zillow.com), home values in California, overall, rose in August of 2010, by .2% for the month, .6% for the quarter, and by 2.8% compared to August of 2009.
Some areas of California are showing modest-to-good growth compared to August 2009. Los Angeles Metro is up 3.3%, San Francisco, 2.7%, Santa Barbara Metro, 1.4%, San Jose and Ventura metros, 2.5%, and San Diego Metro, by a robust 5.3%.
But there are some areas of real weakness, too. Bakersfield is down 2.5%, Fresno, down 5%, San Luis Obispo, 2.8%, Sacramento, 2.4%, and Visalia, down by 10.5% from August 2009.
Riverside is holding steady, with 0% growth for the month, .1% for the quarter, and .1% compared to August of last year.
With the foreclosure machine now gearing up for full operations, an ongoing glut of distressed properties will continue to have a dampening effect on sale prices for some time to come, especially in the areas that have been hardest hit.
So what does all this mean for rehab property investors? Keep your expectations for home value growth at a moderate, realistic level. Research the heck out of market trends in the geographical areas you are looking to invest in. Be particular about the neighborhoods and properties in the immediate area. Lastly, realistically estimate potential net return after rehab, holding and resale.
- Carla Palmer
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