Interesting WSJ piece today on the private local real-estate investors — the "smart money."
Guess what? They were the biggest net sellers of property in 2004:
"The rule of thumb for tourists is to always eat where the locals eat. If the same holds true for real estate, investors should consider selling.
Private local real-estate investors as a group were the biggest net sellers of property last year, selling off about $4.5 billion more than they purchased, according to Real Capital Analytics Inc., a New York real-estate research firm. Their aggressive selling spree began about a year ago, shortly after interest rates began rising last April, and continues today.
Some of these sellers are reinvesting the proceeds of their sales into development or redevelopment projects or in markets where competition for properties is less fierce. Others are holding off on reinvesting money in real estate or are deciding to simply pay the capital-gains taxes on their property sales.
Real Capital President Robert White Jr. says he can tell whether a market has gotten overheated by paying attention to these investors. "They’re not motivated by fees or allocations and they’re very entrepreneurial," he says. "They have total freedom to invest across property types and markets and traditionally have led the market."
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Again, I feel compelled to point out the difference between a full blown bubble and an extended asset class.
Administrative Note And yet another category gets added: Real Estate
Source:
Sell Sign? Local Real-Estate Investors Bail Out
SHEILA MUTO
THE WALL STREET JOURNAL, April 6, 2005; Page B6
http://online.wsj.com/article/0,,SB111274402705898964,00.html
As someone familiar with San Francisco commercial real estate, there are lots of private folks (ourselves included) selling into this market. It’s not just the mega-players like the Shorensteins. The numbers no longer pencil out here.
It’s interesting that the primary buyers are the REITs. I don’t know what they’re seeing that we aren’t. My guess is that they are so flush with cash that they are simply “putting money to work”, as they say. I suppose if you have a 10-20 year horizon, you can marginally justify buying into this rampage.
We have money to put to work too. But at these prices, we’re going to pass right now. When income property actually provides an income in these parts, we may consider buying again.
In the last 90 days, CalPers (The California Public Employees Retirement System) has divested of $6.5 Billion worth of shopping centers and office buildings. Makes one wonder what they know about the real estate market? Food for thought.
A recent article claimed the housing inflation in London led the increases in the countryside as the smart money fled the city for the cheap pastures.
Another recent (Yahoo) article by foreclosure.com claimed the bad news (57% increase over previous month) was coming from the backwaters rather than the hotspots. Could be the bad news in some of those hotspots is masked by developer/investors not willing to give any impression of a topping market. Certainly another increase in the prime rates would let us know whether this is just another little abberation or a trend.
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I want to give buyers something to talk about by investing their resources into getting their home into its best condition. This is time and money well spent but you’ll need to concentrate on the areas that will bring you the most return.
Focus on the areas that buyers notice and value – bathrooms, kitchens, and curb appeal. Make sure your rooms are spotlessly clean and free of clutter. A fresh coat of paint in a neutral color is one of the least costly investments that can go a long way towards making a good impression. De-personalize your rooms by packing away your nick-knacks and dust catchers. If possible. put extra furniture or belongings into storage so that your home appears open and spacious. Clean your windows so they sparkle – and don’t forget the window sills.
Trim your trees and hedges and keep the lawn mowed. Plant some colorful flowers in the garden. Drive by your home and try to look at it from an objective viewpoint. What’s the first thing you notice? Does your front door say, “Welcome”? If not, maybe a fresh coat of paint – or perhaps even a new front door – and some potted plants could help.
The way your house looks should not be your only concern. Is there a pet odor or other potentially offensive smell in the air? Be sure any odor producing agents are removed or controlled to keep your home fresh smelling at all times. When you live in a home you can become used to certain odors and they are easy to overlook. Be sure to ask others if your home passes the “sniff” test.
Be aware that certain investments you made for the personal enjoyment of your home will not necessarily raise the value of your home to prospective buyers. Don’t expect to add on to the price of your home all the money you paid to improve it.
In fact, some things, like swimming pools, can frequently be viewed as a liability. Generally, painting and improving your kitchen and bathrooms will be a good investment. The kitchen is viewed as the heart of a home – most family activities take place here so improving your kitchen can facilitate the sale of your home. Adding a bathroom usually generates a good return as well as adding decking outside.
The best return for your home improvement dollar comes from bathroom remodeling (80%), bathroom addition (81%), minor kitchen remodeling (87%), major kitchen remodeling (80%), and a second storyaddition (83%). The least profitable investments are a home office (54%), reroofing (60%), a sun room (60%), replacing windows (68%), and refinishing your basement (69%). In a slower market, it’s essential to pay attention to the presentation of your home. With so many homes on the market to choose from, you want to be sure you outshine the competition. You may even want to consider hiring a professional home stager to help you.