Making it Stick...or Not

The market for investment property is extremely hot right now.  Supply is down and investors are waiting in the bushes to ambush any distressed sale that comes down the road.  This competition has become extremely fierce the last several months.  What makes the competition so heated is that so many wholesale buyers are prepared, experienced, and play to "win".

I took a look back in my books and the offers I have submitted for clients where we did not win the bidding war.  Here is a look back at the last four months:

The forces of supply and demand are making it difficult to acquire property in a manner that makes sense to maximize profit for resale.  This is a case of too many dollars chasing to few assets.  The guy that is willing to take the least amount of profit will win everytime.

But don't think that it will be this way forever.  The paltry inventories that we see out there are going to change.  Banks have tons of "shadow" inventory in which they are holding but have not yet put back on the market for sale.  This is by no accident. If the banks released all their inventory for liquidation the market would be overwhelmed.  So, they are gaming the market by letting REO homes into the marketplace at a trickle.  It seems like a smart strategy.  However, the number of homes the banks own is growing much faster than the rate they are liquidating them in the marketplace.  This trend can't continue uninterrupted and I expect to see the banks let more homes out into the marketplace once their books start stressing from the overload of homes they own.  I don't know an exact date but I will speculate that it starts happening by summer.