California is still attracting prospectors—for housing, that is. Despite the devaluation in California’s real estate and the restrictions on available credit, many brand new investors are stepping in to take advantage of plummeting home prices. It’s a bet these first time investors hope will eventually pay off, but wagering on the rebound of real estate takes nerves of steel and deep pockets. The possibility for profit on properties purchased today will not exist until the credit crisis is untangled and employment recovers, reestablishing conditions for a rise in demand for housing. A UCLA professor quoted in the Reuter’s article on California housing prospectors warns market weakness may persist for “multiple years.”
first tuesday take: The first wave of investors (which hit every recessionary market) arrived in California in 2008, bought and are now cooling their heels. They gave a temporary lift in income to agent and REO lenders. The second batch of investors will be the old-timers and will not come around until the market stabilizes with either a sustained bottoming in prices and sales volume, or a consistent rise in sales volume but before prices start to rise in response. By then, the first wave of investors who rolled the dice in 2008 will in small part have figured out how to live with reduced rents; others will have dumped their acquisitions.
The speculators who gambled on flipping their acquisition after late 2005 were mostly naïve, inexperienced real estate speculators, attempting to get rich quick as were those who jumped in prematurely in 2008. Experienced real estate investors who buy and hold the stuff will be adding to their holding by filling their boot with cheap assets, but not before 2011—and more likely in 2012. No reason exists to expect homeowner behavior or this recession to chart a course of recovery different from the 90’s recession.
RE: “Dealers, dreamers see gold in California housing bust” from Reuters
