East Bay Blog

Happy Monday, thanks for taking the time to read my East Bay Real Estate Blog. Some interesting real estate news was released today. The numbers released by the National Association of Realtors today showed that last year second-home sales dropped from 40% of all homes sales to 36% of all home sales. This is no surprise. With the change in the market, it was obvious that 2^nd home sales would drop last year compared to 2005, but what is interesting is when you look inside the numbers a little more you will see that vacation home purchases were actually up 4.7% during the year to a record 1.07 million units. How can 2^nd home sales be down so sharply last year while vacation home purchases hit a new record? The answer is…..baby boomers.

The Baby boom generation is starting to hit retirement age, and that means spending more time away, and in vacation communities. So while investment purchases started falling last year, vacation homes were in much demand. Because it is going to be a while before the baby boomers get too old to enjoy their vacation homes, I think the vacation home market will remain pretty stable for the next several years. In addition these markets may not see the price corrections we are seeing in other markets.

So how about the investment market? That activity or lack thereof is what caused the sharp decline in second home purchases last year. Many investors, most notably “flippers” started to disappear last year, and for now seem to be taking a wait and see attitude. That means it is time to start bargain hunting. The best bargains are found when the market seems to be at its worst.

One clue that it is now a good time to start planning for investment is the number of bank owned homes in lower income communities. A couple of hours research on the MLS made it perfectly clear to me that now is the time to start thinking about investment property in these areas. Let me be clear, investment property not for the purpose of flipping, but for the purpose of rent & hold. Lower income neighborhoods are showing the pain of the sub-prime meltdown. These neighborhoods show deep corrections in price, while more affluent neighborhoods are managing to keep their value.

The market is going to stay this way for a while. So I would not suggest trying to flip anything just yet, especially in these neighborhoods. If on the other hand you are an investor and you are not against going into lower income communities with your investment dollars, this is the time to start looking. By the time you hear that the market has stabilized and people are getting back into real estate, it will be too late.