While hedge funds are still able to purchase REO properties (also known as foreclosures) at a 25-40% discount because they are buying several dozen or several hundred at a time, the average investor can expect to save less than 3% off the market price of the average REO.
This figure comes to us from Zillow, which analyzes real estate values and sales around the nation. Only a year ago that savings on foreclosures averaged close to 7%.
There is a shortage of homes for sale
for most investors, there are not enough REO properties to go around, so they
are paying top dollar for these homes, especially in places like Boca Raton,
where the inventory of unsold homes has dropped dramatically from a year ago.
To find currently available homes for sale in Boca Raton, go to: http://properties.jablonteam.com/904421w/index.php?main=city&cityCode=Y21477
The current Palm Beach County inventory of unsold homes stands at less than a 5 month supply (6 months is considered equilibrium). A year ago, the inventory was pegged at an 11 month supply.
Median Home Prices Have Increased by 25%
With this kind of sales surge, it is easy to see why the median value of homes in Boca Raton and much of Palm Beach County has surged by up to 25% from a year ago.
Even if these REOs in Boca Raton do not look like bargains to investors, they are out of reach of first time home buyers because banks want to work with cash buyers when selling REO properties. Typically banks ask for multiple bids and then sell the REO property to the highest and best offer. Highest, naturally, speaks to price. Best always refers to cash, which assures that a deal will go through.
Also, because competition for all homes for sale in Boca Raton and surrounding cities is so intense, investors donâ€™t mind paying close to full price. Thatâ€™s because at the moment, home prices are low enough for investors to pay market value or very close to it, fix up the homes, rent them, and still make a profit.
Investors will buy to rent and hold.
Their expectation of these Boca Raton REO investors is that they will be able to rent to families whose credit will not permit them to qualify for a mortgage for several years. But within 5 to 10 years, those renters will be able to purchase once again.
Â Many of these families will wish to remain in the homes they have rented and will purchase them from the landlord-investor. Due to inflation and continually rising homes values, the original investor will make a profit on the original purchase. And, of course, the investor will have already enjoyed several years of rent payments.
Weâ€™re in a sellerâ€™s market once again.
South Florida is not the only area of the nation whose housing prices have rebounded. According to the Standard & Poors Case Shiller Index, 17 out of the 20 cities it tracks had shown increases on a year over year basis.
Based on continually lower inventory due to greater demand, and ever lower seller price concessions as owners feel more confidence in the market, it is evident that Boca Raton and most of our neighboring cities have reverted to a sellerâ€™s market.
Marc Jablon, The Jablon Team
Â RE/MAX Complete Solutions