subject: Gaining Mastery Over California Foreclosures By Remaining In California Housing Markets [print this page] Handling California foreclosures by staying in the Golden State's property markets -- even though foreclosures, until recently, had been climbing over the last year and a half -- will require that any investor looking to make money in that market come to the game with a strong portfolio. It wasn't always this way in California, though; before the collapse there were many people buying properties with little or no money to speak of.
Why this is so has mainly to do with a string of unrealistic expectations and a fair amount of irrational exuberance, especially out in California real estate markets. Many people basically looked at home buying as an investment instrument rather than an actual home and got into the buying and selling of real estate with little capital and with ridiculously lax lending backing them up.
Because this kind of buying and selling on a short-term basis was going on (it's known as flipping) with noticeable vigor in California, many people lost sight of the fact that every boom will eventually be followed by a bust. The rate of California foreclosures at present is a prime example of the truth of this observation, though many really didn't believe it would actually happen.
These days, that bust broke out everywhere but especially out in California at first. Current rates of foreclosure nationwide average approximately 300,000 in a month. California and several other states contribute nearly 60% to that figure. Buyers have fled the market and sellers are holding properties they can't get rid of, which also helps to explain CA foreclosures and their ubiquity in the Golden State.
Whether or not any investor has the fortitude to stick with California real estate depends on that investor's tolerance for risk, for one. Patience and tolerance or not characteristics that many investors in the old California real estate market possessed in large degree. But, long-term prospects for an eventual rebound look strong, meaning the patient investor could make something of even the California market over time.
It doesn't look as if short-term prospects, at least at present, are going to improve for the next few years even out in California, which has some of the most desirable properties in the country. Just a few years back, an investor in property in California could make a 30% profit in a single year, which is exceptional but which is also clearly unsustainable over the long run.
Nowadays, investors looking to time the market to get in at its bottom and take control of several California foreclosures should expect a more reasonable rate of return of from 3% to 7% in the short-term, though prospects are better over the long term. They will certainly also improve as California stabilizes its housing markets and budget issues. Though a generalization, these figures have held true lately.
Some experts feel that this deep correction was necessary for California on at least a macro scale. The rate of California foreclosures has made investors realize that there are times when they "buy and hold" strategy makes more sense than a flipper-like strategy, which can be after mental to any real estate market. Investors in California properties, therefore, should go into it with good finances and equally good amounts of patience.
