The second most asked question I get is “Is it time to buy an investment property?”
The first most asked is “I lost my house, can I still rent through Classic?”. If you missed it, read it here. But this second most asked question is forefront on a lot of people’s minds. Why? Well, let’s see. Home values in Santa Clarita are down about 30-60% depending on the neighborhood and style of home, interest rates as of 4/6/10 are still crazy low, there seems to be a large pool of renters and there seems not to be a large pool of homes. It’s a valid question, “is now the time to buy?”.
Before I attempt to answer this question from my limited bank of knowledge, let me start by saying that this is an OPINION article. Not fact. No proven crystal ball sits on my desk. My track record isn’t staggering one way or the other. So take all of this with a grain of salt. Now, do I think I am right? Of course. Why would I post this if I didn’t? But if I were you, I would use this info as a piece of the overall pie of information keeping in mind that this is a property manager’s point of view (specifically a property manager from Santa Clarita, CA). It is industry and geographically specific and is biased by my knowledge and experience. I would encourage you to get some opinion from other sources as well, say, a financial planner, a mortgage lender or broker, a real estate sales broker, a pessimist, an optimist, etc…
Now, enjoy my opinion. I believe that we are at or very near (within 5%) the bottom of the market in most areas of Santa Clarita. I believe that we will remain here for some time, perhaps a year or more. I could leave it at that, but I am guessing that some engineer out there is going to want to know why and how I came to that conclusion. If that is not you, you can skip the rest of this post.
Here is some of the data that I used:
- In past declining markets, we have not dipped further than we have this time (granted, the reasons are different this time and there is a first time for everything).
- The fed is fighting tooth and nail to keep rates low until the recovery “gains traction”. (I realize that they have stopped their previous actions in the bond market, but I also believe that they are under the “belief” that the private money will show up. Way can go as far down that rabbit hole as you would like).
- I believe that we have seen the worst of unemployment in Santa Clarita (this is one with which I encounter the most disagreement, partly because it is perhaps the most subjective. Bottom line, this is my perception.) Again, we may hover at this unemployment level for a while, but I think we will not likely dip noticeably lower.
- For the buyer with a down payment of 10-20%, the PITI (principal, interest, taxes, and insurance) payments are darn near the same as the rent for a comparable property in most places.
Now, let’s assume that you assume my above assumptions are correct. What would you conclude? I can at least tell you what I conclude. I conclude that this is probably a good time to purchase an investment property in Santa Clarita and will likely remain so for a year or more. Could I be wrong? Well, I guess it’s possible. Okay, I’ll be honest. It’s not big of a stretch. If rates climb quickly, monthly payments will remain the same if the purchase prices dip which can make investors cringe. If unemployment takes a nasty turn in Santa Clarita, rents will dip which will pull sales prices down. (Oh, did I tell you that I believe rents sometimes drive purchase prices, not vice versa?) Honestly, there are probably lots of other factors that could make my answers wrong, but this is my post, so I get to post my opinion. You can post yours in the comments.
