Just a quick note…
…You may have noticed, as I have, that there has been a strong increase in the number of real estate auctions being advertised.
I’m usually not particularly interested in real estate auctions, if only because I don’t have a good base of knowledge for how to profitably participate in them.
However, my interest has increased a lot lately for one reason: The relative prevalence of auction-style selling in any market is frequently an indicator for the health of that market.
Here’s what I mean: Generally speaking, the more real estate auctions that are being held, the weaker the underlying view of the real estate market is. And conversely, as the number of real estate auctions begins to decline, that will frequently serve as a leading indicator of a recovering real estate market.
So that’s the tip for today: Pay attention to the number of real estate auctions happening in your target market. As the number of auctions increases, the underlying market is probably softening. And as the number of auctions decreases, the underlying market is probably strengthening.
And what’s more, this information gives you a very near real-time indicator of the current health of your target market.
Hope this little tip helps. As always, your comments are welcomed. And thank you for reading RealEstate.BryanEllis.com!
What you are saying about auctions is very true. I live in the Phoenix area and there is a marked increase in auctions here.
We will be seeing a lot more auctions soon and the low prices we are seeing here is really dropping. There is so much inventory and no interest because of low prices of new construction. It is below what a lot of existing homes are selling for.
One big problem is the banks are not lending and are even taking back the loans they have made. This is becoming a big mess down here. If you want to buy it is mostly the big home builders getting loans for their houses.
If you want to see real pain wait until the first quarter of 2009. When the real impact of loss of credit cards and loss of credit card payments hits. Then we are going to see another drop in home prices.
Another good indicator is rental prices, both residential and retail and they are falling fast. Even interest in rental has hit a roadblock in a lot of areas, hence the falling rental prices.
What I hope isn’t the final nail in the coffin may well be the Trillion dollar+ plan being talked about by the government. If that happens we will really see a drop in prices.
Thank you for the above information. One of the hardest thing for a new investor is how to read the market and the use of auctions seems to be a good indicator.
It’s my great pleasure – thank you for your kind words! — Bryan Ellis
Ahhh yes, and also in Jan 09 – the moratorium on foreclosures will be lifted – there are thousands of foreclosures set to auction off in Maricopa County this month! Scary numbers, unless you’re one that makes your living selling auction properties to investors. [grins] I know it’s bad, and I genuinely feel bad for all those affected, but also am VERY excited as this will be incredibly profitable. It’s not always what you know, but who. How many Real Estate millionaires will be created from this market? My guess is A LOT.
Thanks, Bryan, for all your timely words.